O'Bannon doc291 FINDINGS OF FACT 8-8-2014.pdf

					                                                  Case4:09-cv-03329-CW Document291 Filed08/08/14 Page1 of 99




                                           1                    IN THE UNITED STATES DISTRICT COURT

                                           2                  FOR THE NORTHERN DISTRICT OF CALIFORNIA

                                           3
                                               EDWARD O’BANNON, et al.                          No. C 09-3329 CW
                                           4
                                                           Plaintiffs,                          FINDINGS OF FACT
                                           5                                                    AND CONCLUSIONS OF
                                                    v.                                          LAW
                                           6
                                               NATIONAL COLLEGIATE ATHLETIC
                                           7   ASSOCIATION; ELECTRONIC ARTS
                                               INC.; and COLLEGIATE LICENSING
                                           8   COMPANY,
                                           9             Defendants.
                                               ________________________________/
                                          10
For the Northern District of California




                                          11                                 INTRODUCTION
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                                          12        Competition takes many forms.     Although this case raises
                                          13   questions about athletic competition on the football field and the
                                          14   basketball court, it is principally about the rules governing
                                          15   competition in a different arena -- namely, the marketplace.
                                          16        Plaintiffs are a group of current and former college student-
                                          17   athletes.   They brought this antitrust class action against the
                                          18   National Collegiate Athletic Association (NCAA) in 2009 to
                                          19   challenge the association’s rules restricting compensation for
                                          20   elite men’s football and basketball players.       In particular,
                                          21   Plaintiffs seek to challenge the set of rules that bar student-
                                          22   athletes from receiving a share of the revenue that the NCAA and
                                          23   its member schools earn from the sale of licenses to use the
                                          24   student-athletes’ names, images, and likenesses in videogames,
                                          25   live game telecasts, and other footage.      Plaintiffs contend that
                                          26   these rules violate the Sherman Antitrust Act.       The NCAA denies
                                          27   this charge and asserts that its restrictions on student-athlete
                                          28
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                                           1   compensation are necessary to uphold its educational mission and
                                           2   to protect the popularity of collegiate sports.
                                           3         A non-jury trial on Plaintiffs’ claims was held between June
                                           4   9, 2014 and June 27, 2014.      After considering all of the
                                           5   testimony, documentary evidence, and arguments of counsel
                                           6   presented during and after trial, the Court finds that the
                                           7   challenged NCAA rules unreasonably restrain trade in the market
                                           8   for certain educational and athletic opportunities offered by NCAA
                                           9   Division I schools.     The procompetitive justifications that the
                                          10   NCAA offers do not justify this restraint and could be achieved
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                                          11   through less restrictive means.       The Court makes the following
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                                          12   findings of fact and conclusions of law, and will enter as a
                                          13   remedy a permanent injunction prohibiting certain overly
                                          14   restrictive restraints.
                                          15                                FINDINGS OF FACT
                                          16   I.    Background
                                          17         A.    The NCAA
                                          18         The NCAA was founded in 1905 by the presidents of sixty-two
                                          19   colleges and universities in order to create a uniform set of
                                          20   rules to regulate intercollegiate football.         Docket No. 189, Stip.
                                          21   Undisputed Facts, at ¶ 6.      Today, the association has roughly
                                          22   eleven hundred member schools and regulates intercollegiate
                                          23   athletic competitions in roughly two dozen sports.         According to
                                          24   its current constitution, the association seeks to “initiate,
                                          25   stimulate and improve intercollegiate athletics programs for
                                          26   student-athletes and to promote and develop educational
                                          27   leadership, physical fitness, athletics excellence and athletics
                                          28

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                                           1   participation as a recreational pursuit.”        Ex. 2340, 2013-14 NCAA
                                                                             1
                                           2   Division I Manual, at 15.
                                           3           To achieve these goals, the NCAA issues and enforces rules
                                           4   governing athletic competitions among its member schools.         Id. at
                                           5   4.   These rules are outlined in the association’s constitution and
                                           6   bylaws and cover a broad range of subjects.         Among other things,
                                           7   the rules establish academic eligibility requirements for student-
                                           8   athletes, set forth guidelines and restrictions for recruiting
                                           9   high school athletes, and impose limits on the number and size of
                                          10   athletic scholarships that each school may provide.          Id. at 3-5.
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                                          11           Since 1973, the NCAA’s member schools have been organized
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                                          12   into three divisions -- Divisions I, II, and III -- based on the
                                          13   number and quality of opportunities that they provide to
                                          14   participate in intercollegiate athletics.        Stip. Undisputed Facts
                                          15   ¶ 27.       Division I schools provide the greatest number and highest
                                          16   quality of opportunities to participate in intercollegiate
                                          17   athletics because they sponsor more sports teams and provide more
                                          18   financial aid to student-athletes than schools in Divisions II and
                                          19   III.2       To qualify for membership in Division I, a school must
                                          20   sponsor a minimum of fourteen varsity sports teams, including
                                          21   football, and distribute a baseline amount of financial aid to its
                                          22   student-athletes.       Trial Tr. 2043:13-:25 (Delany); Ex. 2340 at
                                          23   365, 367.       Roughly three-hundred and fifty of the NCAA’s eleven
                                          24
                                                       1
                                                      All exhibit citations in this order are to the page numbers
                                          25
                                               provided by the parties at trial, which do not necessarily correspond to
                                          26   the page numbers created by the original author of the exhibit.
                                                    2 The NCAA’s bylaws define financial aid to mean “funds provided to
                                          27   student-athletes from various sources to pay or assist in paying their
                                               cost of education at the institution.” Ex. 2340 at 206. The Court
                                          28   adopts this definition for the purposes of this order.

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                                           1   hundred schools currently compete in Division I.       Trial Tr.
                                           2   1743:23 (Emmert).
                                           3        Division I itself further is divided, for the purposes of
                                           4   football competition, into two subdivisions: the Football Bowl
                                           5   Subdivision (FBS) and the Football Championship Subdivision
                                                        3
                                           6   (FCS).       Trial Tr. 2144:9-:11 (Petr); Ex. 2340 at 364-67.      FBS
                                           7   schools are allowed to offer up to eighty-five full scholarships
                                           8   to members of their football teams.      In contrast, FCS schools are
                                           9   permitted to offer only a smaller number of full scholarships to
                                          10   members of their teams.      Stip. Undisputed Facts ¶ 28.       Because FBS
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                                          11   schools are able to offer more football scholarships than FCS
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                                          12   schools, the level of football competition within FBS is generally
                                          13   higher than within FCS.      Currently, about one hundred and twenty
                                          14   schools compete in FBS.      Id. ¶ 45.
                                          15        In addition to the two football subdivisions, Division I
                                          16   schools are also organized into a number of conferences, which
                                          17   essentially function as smaller leagues within the NCAA.          The
                                          18   conferences -- most of which contain between eight and fifteen
                                          19   schools -- typically have their own membership requirements.             Most
                                          20   conferences also organize conference-specific games and events
                                          21   featuring their member schools, including regular season football
                                          22   games, regular season basketball games, and post-season basketball
                                          23   tournaments.      Although the conferences are considered members of
                                          24   the NCAA and must comply with its constitution and bylaws, they
                                          25   operate independently for the most part and have the authority to
                                          26
                                                    3 Prior to 2006, FBS was known as Division I-A and FCS was known as
                                          27   Division I-AA. For the purposes of simplicity, this order uses “FBS”
                                               and “FCS” to refer to these subdivisions even when discussing student-
                                          28   athletes who played Division I football before 2006.

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                                           1   generate their own revenue and set their own rules, provided those
                                           2   rules are consistent with NCAA policy.      Ex. 2340 at 22.
                                           3        The rules governing participation and competition in Division
                                           4   I are enacted by an eighteen-member body known as the Division I
                                           5   Board of Directors, which typically receives proposals from the
                                           6   division’s member schools and conferences.      Trial Tr. 1744:16-
                                           7   1745:2 (Emmert); Ex. 2340 at 35.     The Board is made up of
                                           8   university presidents and chancellors from eighteen different
                                           9   colleges or universities.    Ex. 2340 at 35.
                                          10        A school or conference that seeks to propose a new rule or
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                                          11   rule change typically does so by submitting the proposal to a
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                                          12   designated committee or task force appointed by the Board.         Trial
                                          13   Tr. 1745:20-1746:15.    That committee or task force then considers
                                          14   the proposal and, if it approves, may forward the proposal to a
                                          15   body known as the Division I Legislative Council, which is made up
                                          16   of athletics administrators from schools in each of the thirty-two
                                          17   Division I conferences.    Id.; Ex. 2340 at 37.     The Legislative
                                          18   Council may then forward the proposal to the Board of Directors,
                                          19   which has the ultimate authority to approve the proposal by a
                                          20   majority vote.   Trial Tr. 1745:20-1746:15.     Actions by the Board
                                          21   may only be repealed through an override process that involves a
                                          22   vote of sixty-two percent of the NCAA’s member institutions.         Id.
                                          23   1747:6-:20.   The NCAA’s current president, Dr. Mark Emmert, does
                                          24   not have any voting power in this process.      Id. 1746:19-:24.
                                          25        B.   Electronic Arts Inc. & Collegiate Licensing Company
                                          26        Electronic Arts Inc. (EA) is a corporation which develops and
                                          27   manufactures videogames.    Stip. Undisputed Facts ¶ 35.        It created
                                          28   and sold an annual NCAA-branded college football videogame every

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                                           1   year between 1997 and 2013.       Id. ¶ 39.    It also created and sold
                                           2   an annual NCAA-branded college basketball game every year between
                                           3   1998 and 2010.      Id. ¶ 40.   In order to create these games, it
                                           4   entered into licensing agreements with the NCAA and its member
                                           5   schools and paid them for permission to use their intellectual
                                           6   property, including their marks, in the videogames.           Id. ¶¶ 37-38;
                                           7   Exs. 1125, 1126.      Collegiate Licensing Company (CLC) is a Georgia
                                           8   corporation that licenses trademarks of the NCAA and several of
                                           9   its member schools and conferences.         Stip. Undisputed Facts ¶¶ 32-
                                          10   34.    Although Plaintiffs originally brought claims against both EA
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                                          11   and CLC in this action, they subsequently agreed to settle those
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                                          12   claims.
                                          13          C.    Plaintiffs
                                          14          Plaintiffs are twenty current and former student-athletes,
                                          15   all of whom play or played for an FBS football or Division I men’s
                                          16   basketball team between 1956 and the present.          Some, but not all,
                                          17   Plaintiffs went on to play professional sports after they left
                                          18   college.     They represent the following class, which this Court
                                          19   certified under Federal Rule of Civil Procedure 23(b)(2) in
                                          20   November 2013:
                                          21                All current and former student-athletes
                                                            residing in the United States who compete on,
                                          22                or competed on, an NCAA Division I (formerly
                                                            known as “University Division” before 1973)
                                          23                college or university men’s basketball team or
                                                            on an NCAA Football Bowl Subdivision (formerly
                                          24                known as Division I-A until 2006) men’s
                                                            football team and whose images, likenesses
                                          25                and/or names may be, or have been, included or
                                                            could have been included (by virtue of their
                                          26                appearance in a team roster) in game footage
                                                            or in videogames licensed or sold by
                                          27                Defendants, their co-conspirators, or their
                                                            licensees.
                                          28

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                                           1   Case No. 09-1967, Docket No. 1025, April 11, 2014 Order, at 47-48
                                           2   (amending definition of previously certified class).
                                           3   II.    The Relevant Markets
                                           4          As explained in previous orders, Plaintiffs allege that the
                                           5   NCAA has restrained trade in two related national markets, which
                                           6   they refer to as the “college education market” and the “group
                                           7   licensing market.”      Although these alleged markets involve many of
                                           8   the same participants, each market ultimately involves a different
                                           9   set of buyers, sellers, and products.         Accordingly, this order
                                          10   addresses each market separately.
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                                          11          A.    College Education Market
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                                          12          The evidence presented at trial, including testimony from
                                          13   both experts and lay witnesses, establishes that FBS football and
                                          14   Division I basketball schools compete to recruit the best high
                                          15   school football and basketball players.         Trial Tr. 9:1-:7
                                          16   (O’Bannon); 114:21-117:17 (Noll); 831:8-:11 (Rascher); 1759:21-:22
                                          17   (Emmert); Ex. 2530.      Specifically, these schools compete to sell
                                          18   unique bundles of goods and services to elite football and
                                          19   basketball recruits.       The bundles include scholarships to cover
                                          20   the cost of tuition, fees, room and board, books, certain school
                                          21   supplies, tutoring, and academic support services.          Trial Tr.
                                          22   40:2-:20 (O’Bannon); 582:6-:18 (Prothro); 1741:10-:20 (Emmert);
                                          23   Ex. 2340 at 207.      They also include access to high-quality
                                          24   coaching, medical treatment, state-of-the-art athletic facilities,
                                          25   and opportunities to compete at the highest level of college
                                          26   sports, often in front of large crowds and television audiences.
                                          27   Trial Tr. 13:4-:12 (O’Bannon); 556:8-558:2 (Prothro); 1157:20-
                                          28   1158:7 (Staurowsky); 1721:3-1722:19 (Emmert).          In exchange for

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                                           1   these unique bundles of goods and services, football and
                                           2   basketball recruits must provide their schools with their athletic
                                           3   services and acquiesce in the use of their names, images, and
                                           4   likenesses for commercial and promotional purposes.        Id. 109:5-
                                           5   110:12 (Noll).    They also implicitly agree to pay any costs of
                                           6   attending college and participating in intercollegiate athletics
                                           7   that are not covered by their scholarships.       See Ex. 2340 at 207.
                                           8           The evidence presented at trial demonstrates that FBS
                                           9   football and Division I basketball schools are the only suppliers
                                          10   of the unique bundles of goods and services described above.
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                                          11   Recruits who are skilled enough to play FBS football or Division I
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                                          12   basketball do not typically pursue other options for continuing
                                          13   their education and athletic careers beyond high school.
                                          14   Plaintiffs’ economic expert, Dr. Roger Noll, examined the rates at
                                          15   which elite football and basketball recruits accept athletic
                                          16   scholarships to play FBS football or Division I basketball.        He
                                          17   observed that, between 2007 and 2011, more than ninety-eight
                                          18   percent of football recruits classified as four- or five-star
                                          19   recruits (the two highest ratings available) by Rivals.com
                                          20   accepted offers to play FBS football.      Trial Tr. 113:2-114:13; Ex.
                                          21   2529.    None of the five-star recruits and only 0.2% of four-star
                                          22   recruits chose to play football at an FCS school and none chose to
                                          23   play at a Division II or III school during that period.         Ex. 2529.
                                          24   Among three-star recruits, ninety-two percent of those offered a
                                          25   scholarship from an FBS school accepted one.       Id.   Less than four
                                          26   percent of all three-star recruits accepted an offer to play
                                          27   football at a non-FBS school.     Id.
                                          28

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                                           1        This pattern is even more stark for basketball recruits.
                                           2   Between 2007 and 2011, no four- or five-star basketball recruits
                                           3   and less than one percent of all two- and three-star recruits
                                           4   accepted offers to play for a non-Division I school.        Id.   Even
                                           5   among zero-star recruits, only one percent accepted offers to play
                                           6   basketball outside of Division I.       Id.   In contrast, roughly
                                           7   ninety-five percent of all recruits offered Division I basketball
                                           8   scholarships in the Rivals.com sample accepted one.        Id.    This
                                           9   data supports Dr. Noll’s conclusion that “if the top athletes are
                                          10   offered a D-I scholarship, they take it.        They do not go anywhere
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                                          11   else.”   Trial Tr. 114:6-:7.
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                                          12        On cross-examination, Dr. Noll conceded that the Rivals.com
                                          13   data he used in his analysis came from recruits’ self-reported
                                          14   information about the scholarship offers they received and
                                          15   accepted.   Id. 486:7-:9.   However, this fact does not render Dr.
                                          16   Noll’s opinion unreliable.     Recruits have a strong incentive to
                                          17   report accurate information to Rivals.com because the information
                                          18   is relatively easy to verify; after all, a recruit’s lie about
                                          19   accepting a scholarship from a particular school will be
                                          20   discovered as soon as his name does not appear on that school’s
                                          21   roster or list of committed recruits.         In any event, the NCAA has
                                          22   not presented any data of its own to contradict the Rivals.com
                                          23   data nor any other evidence, expert or otherwise, to cast doubt on
                                          24   Dr. Noll’s conclusion that there are no substitutes for the
                                          25   opportunities offered by FBS football and Division I basketball
                                          26   schools.
                                          27        The only potential substitutes that the NCAA has identified
                                          28   are the opportunities offered by schools in other divisions,

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                                           1   collegiate athletics associations, or minor and foreign
                                           2   professional sports leagues.    None of these other divisions,
                                           3   associations, or professional leagues, however, provides the same
                                           4   combination of goods and services offered by FBS football and
                                           5   Division I basketball schools.    Schools in FCS and Divisions II
                                           6   and III all provide a lower number of scholarships than FBS
                                           7   football and Division I basketball schools, which results in a
                                           8   lower level of athletic competition.      The National Intercollegiate
                                           9   Athletic Association (NAIA), National Junior College Athletic
                                          10   Association (NJCAA), National Christian Collegiate Athletic
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                                          11   Association (NCCAA), and United States Collegiate Athletic
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                                          12   Association (USCAA) likewise provide fewer scholarships and offer
                                          13   a lower level of competition.    What’s more, the schools in these
                                          14   other divisions and associations are often smaller than FBS
                                          15   football and Division I basketball schools, spend much less on
                                          16   athletics, and may not even provide opportunities to attend a
                                          17   four-year college.    Id. 2824:14-:24, 2826:16-2827:7, 2829:17-
                                          18   2830:12 (Stiroh).    This is why, as Dr. Noll concluded, these other
                                          19   schools do not compete with FBS football and Division I basketball
                                          20   schools for recruits.
                                          21           Dr. Noll also analyzed the Rivals.com data to show that FBS
                                          22   schools almost always defeated non-FBS schools in head-to-head
                                          23   recruiting contests for the same football recruit between 2007 and
                                          24   2011.    Id. 116:6-118:11, 474:23-475:14; Ex. 2530.     His analysis of
                                          25   head-to-head recruiting contests for basketball players revealed
                                          26   the same discrepancy between Division I and non-Division I
                                          27   schools.    Trial Tr. 116:6-118:11.     Notably, he did not observe
                                          28   this discrepancy when comparing head-to-head recruiting contests

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                                           1   among FBS football schools or Division I basketball schools.        Id.;
                                           2   Ex. 2530 at 3.    Even when he compared the success of the schools
                                           3   within the five major Division I conferences -- namely, the
                                           4   Pacific 12 Conference (Pac 12), Big 12 Conference, Atlantic Coast
                                           5   Conference, Southeastern Conference (SEC), and Big 10
                                           6   Conference -- to that of schools in less prominent Division I
                                           7   conferences, he found that they were still in competition with
                                           8   each other.   Trial Tr. 116:9-:13 (“And unlike the finding for
                                           9   other divisions and junior colleges and NAIA and all the rest that
                                          10   was in the first picture, what we find here is that although the
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                                          11   major conferences win more than they lose, in competing against
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                                          12   the lesser conferences, there is considerable competitive
                                          13   overlap.”).   Thus, the bundles of goods and services offered by
                                          14   schools in FCS, Divisions II and III, and other non-NCAA
                                          15   collegiate athletics associations are not substitutes for the
                                          16   bundles of goods and services offered by FBS football and Division
                                          17   I basketball schools.
                                          18        Nor are the opportunities offered by the professional leagues
                                          19   that the NCAA has identified here.      Dr. Noll noted that elite
                                          20   football and basketball recruits rarely forego opportunities to
                                          21   play FBS football or Division I basketball in order to play
                                          22   professionally.   Neither the National Football League (NFL) nor
                                          23   the National Basketball Association (NBA) permits players to enter
                                          24   the league immediately after high school.      Id. 68:17-69:6
                                          25   (O’Bannon).   Although other professional leagues -- such as the
                                          26   NBA Development League (D-League), the Arena Football League
                                          27   (AFL), and certain foreign football and basketball leagues --
                                          28   permit players to join immediately after high school, recruits do

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                                           1   not typically pursue opportunities in those leagues.        Id.
                                           2   482:11-:13 (Noll).    When Dr. Noll was asked why he did not conduct
                                           3   an analysis of recruits who chose to play professionally in these
                                           4   leagues, he replied that too few had ever done so to conduct such
                                           5   an analysis.   Id. 484:19-485:13 (“It would be hard to do an
                                           6   analysis of zero.”).    He also noted that many recruits may not
                                           7   even be given an opportunity to play in these leagues.           Id.
                                           8   482:14-:17 (“The opportunity is not given to very many high school
                                           9   athletes to play in Europe.”).     What’s more, none of these leagues
                                          10   offers the same opportunity to earn a higher education that FBS
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                                          11   football and Division I basketball schools provide.        For all of
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                                          12   these reasons, the Court finds that there are no professional
                                          13   football or basketball leagues capable of supplying a substitute
                                          14   for the bundle of goods and services that FBS football and
                                          15   Division I basketball schools provide.      These schools comprise a
                                          16   relevant college education market, as described above.
                                          17        B.    Group Licensing Market
                                          18        Professional athletes often sell group licenses to use their
                                          19   names, images, and likenesses in live game telecasts, videogames,
                                          20   game re-broadcasts, advertisements, and other archival footage.4
                                          21   Plaintiffs allege that, in the absence of the NCAA’s challenged
                                          22   rules, FBS football and Division I basketball players would also
                                          23   be able to sell group licenses for the use of their names, images,
                                          24
                                                    4 Plaintiffs presented some evidence at trial of a market for
                                          25   licenses to use student-athletes’ names, images, and likenesses in other
                                               merchandise, such as jerseys and bobbleheads. The Court does not
                                          26   address this market because Plaintiffs previously abandoned all of their
                                               claims related to such markets. Docket No. 827, June 20, 2013 Hrg. Tr.
                                          27   54:13-:16. In addition, the evidence they presented at trial regarding
                                               merchandise-related licenses did not constitute proof of a market for
                                          28   group licenses but, rather, only individual licenses.

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                                           1   and likenesses.    Specifically, they contend that members of
                                           2   certain FBS football and Division I basketball teams would be able
                                           3   to join together to offer group licenses, which they would then be
                                           4   able to sell to their respective schools, third-party licensing
                                           5   companies, or media companies seeking to use student-athletes’
                                           6   names, images, and likenesses.    Plaintiffs have identified three
                                           7   submarkets within this broader group licensing market: (1) a
                                           8   submarket for group licenses to use student-athletes’ names,
                                           9   images, and likenesses in live football and basketball game
                                          10   telecasts; (2) a submarket for group licenses to use student-
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                                          11   athletes’ names, images, and likenesses in videogames; and (3) a
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                                          12   submarket for group licenses to use student-athletes’ names,
                                          13   images, and likenesses in game re-broadcasts, advertisements, and
                                          14   other archival footage.
                                          15             1.      Submarket for Group Licenses to Use Student-
                                                                 Athletes’ Names, Images, and Likenesses in Live
                                          16                     Game Telecasts
                                          17        The Court finds that a submarket exists in which television
                                          18   networks seek to acquire group licenses to use FBS football and
                                          19   Division I basketball players’ names, images, and likenesses in
                                          20   live game telecasts.    Television networks frequently enter into
                                          21   licensing agreements to use the intellectual property of schools,
                                          22   conferences, and event organizers -- such as the NCAA or a bowl
                                          23   committee -- in live telecasts of football and basketball games.
                                          24   In these agreements, the networks often seek to acquire the rights
                                          25   to use the names, images, and likenesses of the participating
                                          26   student-athletes during the telecast.     For instance, the NCAA’s
                                          27   1994 licensing agreement granting CBS the rights to telecast the
                                          28

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                                           1   Division I men’s basketball tournament every year from 1995 to
                                           2   2002 includes a “Name & Likeness” provision that states:
                                           3             The Network, its sponsors, their advertising
                                                         representatives and the stations carrying the
                                           4             telecasts of the games will have the right to
                                                         make appropriate references (including without
                                           5             limitation, use of pictures) to NCAA and the
                                                         universities and colleges of the teams, the
                                           6             sites, the games and the participants in and
                                                         others identified with the games and in the
                                           7             telecasting thereof, provided that the same do
                                                         not constitute endorsements of a commercial
                                           8             product.
                                           9   Ex. 2104 at 16 (emphasis added).     A 1999 agreement between the
                                          10   NCAA and CBS for the rights to telecast certain Division I
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                                          11   basketball games contains a “Name & Likeness” provision with
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                                          12   nearly identical language.    Ex. 2116 at 17 (granting the “right to
                                          13   make appropriate references (including without limitation, use of
                                          14   pictures) to . . . the participants in and others identified with
                                          15   the games” (emphasis added)).    An agreement between the FBS
                                          16   conferences, the University of Notre Dame, and Fox Broadcasting
                                          17   Company for the rights to telecast certain 2007, 2008, and 2009
                                          18   bowl games similarly provides that the event organizer will be
                                          19   solely responsible for ensuring that Fox has “the rights to use
                                          20   the name and likeness, photographs and biographies of all
                                          21   participants, game officials, cheerleaders” and other individuals
                                          22   connected to the game.   Ex. 2162 at 9.    Plaintiffs also provided
                                          23   other contracts containing similar language.      See, e.g., Ex. 2230
                                          24   at 10 (granting the broadcaster “all name and likeness rights of
                                          25   all participants, officials, competing teams and any other persons
                                          26   connected with the Events that are reasonable or necessary for the
                                          27   Telecast of the Events”); Ex. 3078 at 2-3 (providing that the Big
                                          28   10 would use “reasonable commercial efforts” to obtain from any

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page15 of 99




                                           1   non-conference opponent the “right . . . to use its respective
                                           2   players’ names, likenesses, and that school’s trademarks, logos
                                           3   and other items in promoting, advertising and Telecasting any such
                                           4   game”).   These contracts demonstrate that there is a demand for
                                           5   these rights among television networks.
                                           6        Plaintiffs’ broadcasting industry expert, Edwin Desser,
                                           7   confirmed that provisions like these are common and that they have
                                           8   economic value to television networks.     Trial Tr. 651:9-:11,
                                           9   699:18-700:3, 681:18-:23 (“If you’re running a business like a
                                          10   television network, a broadcast station, you would prefer to have
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                                          11   consents, and you would like to have somebody stand behind those
    United States District Court




                                          12   consents so that you don’t have to worry about somebody coming
                                          13   after you later with a claim.”).     Thus, a market for these rights
                                          14   exists.   Plaintiffs also demonstrated that this is a market for
                                          15   group licenses -- not individual licenses.      Mr. Desser testified
                                          16   that a “television sports agreement is a bundle of rights and
                                          17   responsibilities that are all interrelated and that, you know,
                                          18   create value, provide comfort, and are [] integrated into the
                                          19   agreement.”   Id. 658:14-:19.   A license to use an individual
                                          20   student-athlete’s name, image, and likeness during a game telecast
                                          21   would not have any value to a television network unless it was
                                          22   bundled with licenses to use every other participating student-
                                          23   athlete’s name, image, and likeness.
                                          24        The NCAA’s broadcasting industry expert, Neal Pilson,
                                          25   testified that sports broadcasters need not acquire the rights to
                                          26   use student-athletes’ names, images, and likenesses and that the
                                          27   primary reason they enter into licensing agreements with event
                                          28   organizers is to gain exclusive access to the facility where the

                                                                                  15
                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page16 of 99




                                           1   event will occur.      Trial Tr. 720:5-:17.    This testimony is not
                                           2   convincing.       Mr. Pilson admitted that broadcasters must acquire
                                           3   certain rights even from visiting teams who do not control access
                                           4   to the event facility.      Id. 803:5-804:8.   He also acknowledged
                                           5   that broadcasting agreements -- like those quoted above --
                                           6   sometimes refer expressly to name, image, and likeness “rights.”
                                           7   Id. 805:2-:16.      Accordingly, the Court finds that, absent the
                                           8   challenged NCAA rules, teams of FBS football and Division I
                                           9   basketball players would be able to create and sell group licenses
                                          10   for the use of their names, images, and likenesses in live game
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                                          11   telecasts.
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                                          12                2.     Submarket for Group Licenses to Use Student-
                                                                   Athletes’ Names, Images, and Likenesses in
                                          13                       Videogames
                                          14        Like television networks, videogame developers would seek to
                                          15   acquire group licenses to use the names, images, and likenesses of
                                          16   FBS football and Division I basketball players if the NCAA did not
                                          17   prohibit student-athletes from selling such licenses.       EA seeks to
                                          18   make all of its sports-themed videogames “as authentic as
                                          19   possible.”    Trial Tr. 1656:7 (Linzner).      One of the company’s vice
                                          20   presidents, Joel Linzner, explained, “We have found that it is
                                          21   pleasing to our customers to be able to use the real athletes
                                          22   depicted as realistically as possible and acting as realistically
                                          23   as possible.”      Id. 1658:3-:6; see also Ex. 2007 at 50-54
                                          24   (describing demand for use of student-athletes’ names, images, and
                                          25   likenesses in videogames).      To do this, the company typically
                                          26   negotiates licenses with professional sports leagues and teams to
                                          27   use their trademarks, logos, and other intellectual property in
                                          28   videogames.       Trial Tr. 1656:10-1657:25.   It also negotiates with

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page17 of 99




                                           1   groups of professional athletes for licenses to use their names,
                                           2   images, and likenesses.   Id.   EA would be interested in acquiring
                                           3   the same rights from student-athletes in order to produce college
                                           4   sports-themed videogames, if it were permitted to do so.        Id.
                                           5   1669:24-1670:24.    Accordingly, the Court finds that, absent the
                                           6   challenged NCAA rules, there would be a demand among videogame
                                           7   developers for group licenses to use student-athletes’ names,
                                           8   images, and likenesses.
                                           9        The NCAA asserts that such demand would not exist because it
                                          10   has ceased licensing its intellectual property for use in
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                                          11   videogames, making it unlikely that any developer would seek to
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                                          12   develop a videogame using the names, images, and likenesses of
                                          13   student-athletes.   This assertion is not supported by the trial
                                          14   record.   Although the NCAA recently declined to renew its license
                                          15   with EA, it has not presented any evidence suggesting that it will
                                          16   never enter into such an agreement again in the future.         None of
                                          17   its current bylaws preclude it from entering into such an
                                          18   agreement.    Furthermore, the evidence presented at trial
                                          19   demonstrates that, prior to this litigation, the NCAA found it
                                          20   profitable to license its intellectual property for use in
                                          21   videogames.   Indeed, it continued to renew its annual licensing
                                          22   agreement with EA, even as the company evaded the NCAA’s rules
                                          23   prohibiting it from using student-athletes’ images and likenesses
                                          24   in videogames.   Throughout the late 2000s, EA’s NCAA-branded
                                          25   videogames featured playable avatars that could easily be
                                          26   identified as real student-athletes despite the NCAA’s express
                                          27   prohibition on featuring student-athletes in videogames.        The EA
                                          28   avatars played the same positions as their real-life counterparts,

                                                                                  17
                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page18 of 99




                                           1   wore the same jersey numbers and uniform accessories, haled from
                                           2   the same home state, and shared the same height, weight,
                                           3   handedness, and skin color.    Trial Tr. 27:14-28:11 (O’Bannon);
                                           4   568:6-569:24 (Prothro); 930:5-931:7 (Rascher).      For all of these
                                           5   reasons, the Court finds that a submarket would exist for group
                                           6   licenses to use student-athletes’ names, images, and likenesses in
                                           7   videogames if student-athletes were permitted to receive
                                           8   compensation for such licenses.
                                           9               3.   Submarket for Group Licenses to Use Student-
                                                                Athletes’ Names, Images, and Likenesses in Game Re-
                                          10                    Broadcasts, Advertisements, and Other Archival
                                                                Footage
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                                          11
                                                    Plaintiffs have shown that television networks, advertisers,
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                                          12
                                               and third-party licensing companies seek to use archival footage
                                          13
                                               of student-athletes in game re-broadcasts, commercials, and other
                                          14
                                               products.   Several of the live telecasting agreements discussed
                                          15
                                               above included provisions granting the television network the
                                          16
                                               rights to use archival footage, as well.      See, e.g. Ex. 3078 at 2-
                                          17
                                               3 (granting the Big 10 Network the rights to use certain student-
                                          18
                                               athletes’ names and likenesses in “promoting, advertising and
                                          19
                                               Telecasting” a game); Ex. 2230 at 2 (granting Fox Sports Net the
                                          20
                                               “right to re-Telecast the Selected Events,” the “right to
                                          21
                                               distribute highlights of the Selected Events,” and the specific
                                          22
                                               right to use the “names and likenesses of the players” to promote
                                          23
                                               certain games as well as the network itself).      Tyrone Prothro, a
                                          24
                                               former wide receiver for the University of Alabama, saw footage in
                                          25
                                               a commercial of a famous catch that he made during a game.      Trial
                                          26
                                               Tr. 565:24-566:8.   Finally, one of the NCAA’s vice presidents,
                                          27
                                               Mark Lewis, established that the NCAA has licensed all of its
                                          28

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page19 of 99




                                           1   archival footage from past NCAA championships to a third-party
                                           2   licensing company, T3Media, which acts as the association’s agent
                                           3   in licensing that footage for use in game re-broadcasts,
                                           4   advertisements, and any other products.      Id. 3206:13-:25.
                                           5   Although T3Media is not permitted to license footage of current
                                           6   student-athletes, it still acquires the rights to this footage
                                           7   while the student-athletes are in school for later use (after
                                           8   acquiring the student-athletes’ consent).      This is enough to show
                                           9   that demand for this footage exists.     Based on this evidence, the
                                          10   Court finds that, absent the NCAA’s challenged rules, there would
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                                          11   be a demand among television networks, third-party licensing
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                                          12   companies, and advertisers for group licenses to use student-
                                          13   athletes in game re-broadcasts, advertisements, and other archival
                                          14   footage.
                                          15   III. The Challenged Restraint
                                          16        NCAA rules prohibit current student-athletes from receiving
                                          17   any compensation from their schools or outside sources for the use
                                          18   of their names, images, and likenesses in live game telecasts,
                                          19   videogames, game re-broadcasts, advertisements, and other footage.
                                          20   Plaintiffs contend that these rules restrain trade in the two
                                          21   markets identified above.
                                          22        The NCAA imposes strict limits on the amount of compensation
                                          23   that student-athletes may receive from their schools.       Most
                                          24   importantly, it prohibits any student-athlete from receiving
                                          25   “financial aid based on athletics ability” that exceeds the value
                                          26   of a full “grant-in-aid.”    Ex. 2340 at 208.    The bylaws define a
                                          27   full “grant-in-aid” as “financial aid that consists of tuition and
                                          28   fees, room and board, and required course-related books.”       Id. at

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                                                  Case4:09-cv-03329-CW Document291 Filed08/08/14 Page20 of 99




                                           1   207.        This amount varies from school to school and from year to
                                           2   year.       Any student-athlete who receives financial aid in excess of
                                           3   this amount forfeits his athletic eligibility.         Id. at 208.
                                           4           In addition to this cap on athletics-based financial aid, the
                                           5   NCAA also imposes a separate cap on the total amount of financial
                                           6   aid that a student-athlete may receive.         Specifically, it
                                           7   prohibits any student-athlete from receiving financial aid in
                                           8   excess of his “cost of attendance.”          Ex. 2340 at 208.   Like the
                                           9   term “grant-in-aid,” the term “cost of attendance” is a school-
                                          10   specific figure defined in the bylaws.         It refers to “an amount
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                                          11   calculated by [a school]’s financial aid office, using federal
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                                          12   regulations, that includes the total cost of tuition and fees,
                                          13   room and board, books and supplies, transportation, and other
                                          14   expenses related to attendance” at that school.         Id. at 206.
                                          15   Because it covers the cost of “supplies, transportation, and other
                                          16   expenses,” the cost of attendance is generally higher than the
                                          17   value of a full grant-in-aid.         The gap between the full grant-in-
                                          18   aid and the cost of attendance varies from school to school but is
                                                                                       5
                                          19   typically a few thousand dollars.
                                          20           The NCAA also prohibits any student-athlete from receiving
                                          21   compensation from outside sources based on his athletic skills or
                                                             6
                                          22   ability.          Thus, while a student-athlete may generally earn money
                                          23
                                                       5
                                                      Under certain circumstances, a student-athlete who has an
                                          24   unexpected “special financial need” may be permitted to receive
                                               additional aid beyond the cost of attendance. Trial Tr. 2144:25-
                                          25   2145:14 (Petr). This additional aid comes from his school’s “student
                                               assistance fund” and could include money for “needed clothing, needed
                                          26   supplies, a computer,” or other academic needs. Ex. 2340 at 238.
                                                    6 The NCAA’s bylaws contain a minor exception permitting student-
                                          27   athletes to receive limited compensation for educational expenses
                                               “awarded by the U.S. Olympic Committee or a U.S. national governing
                                          28   body.” Ex. 2340 at 211.

                                                                                       20
                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page21 of 99




                                           1   from any “on- or off-campus employment” unrelated to his athletic
                                           2   ability, he may not receive “any remuneration for value or utility
                                           3   that the student-athlete may have for the employer because of the
                                           4   publicity, reputation, fame or personal following that he or she
                                           5   has obtained because of athletics ability.”      Id. at 211.    Student-
                                           6   athletes are also barred from endorsing any commercial product or
                                           7   service while they are in school, regardless of whether or not
                                           8   they receive any compensation to do so.      Id. at 86.
                                           9        Dr. Noll testified that these rules restrain competition
                                          10   among schools for recruits.    If the grant-in-aid limit were
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                                          11   higher, schools would compete for the best recruits by offering
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                                          12   them larger grants-in-aid.    Similarly, if total financial aid was
                                          13   not capped at the cost of attendance, schools would compete for
                                          14   the best recruits by offering them compensation exceeding the cost
                                          15   of attendance.   This competition would effectively lower the price
                                          16   that the recruits must pay for the combination of educational and
                                          17   athletic opportunities that the schools provide.       As Dr. Noll
                                          18   explained, “if the scholarship value is suppressed, that means the
                                          19   net price paid by a student-athlete to attend college is higher.”
                                          20   Trial Tr. 105:24-107:1.    Thus, he explained, because the NCAA has
                                          21   the power to and does suppress the value of athletic scholarships
                                          22   through its grant-in-aid rules, it has increased the prices
                                          23   schools charge recruits.    Id. 127:20-129:13.
                                          24        Dr. Noll’s opinions are consistent with the opinions of the
                                          25   NCAA’s own economic expert, Dr. Daniel Rubinfeld, who testified
                                          26   that the NCAA operates as a “joint venture which imposes
                                          27   restraints” on trade.   Id. 2922:20-:21.     Dr. Rubinfeld
                                          28   specifically acknowledged that “the NCAA does impose a restraint,

                                                                                  21
                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page22 of 99




                                           1   the restraint we have been discussing in this case.”       Id.
                                           2   2921:8-:9.   Although he opined that this restraint was lawful
                                           3   because it serves procompetitive purposes, he never denied that
                                           4   the NCAA restricts competition among its members for recruits.         In
                                           5   fact, his own economics textbook specifically refers to the NCAA
                                           6   as a “cartel,” which he defined during his testimony as “a group
                                           7   of firms that impose a restraint.”      Id. 2975:3-:4.   Although the
                                           8   NCAA’s other economic expert, Dr. Lauren Stiroh, testified that
                                           9   the NCAA does not restrain competition in any market, her opinions
                                          10   were based on the theory that anticompetitive effects cannot arise
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                                          11   unless consumers in a “downstream market” are harmed.       Id.
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                                          12   2766:16-:22.   In this case, those consumers would be people who
                                          13   watch or attend college football and basketball games or purchase
                                          14   goods using the names, images, and likenesses of student-athletes.
                                          15   The Court rejects Dr. Stiroh’s theory that Plaintiffs cannot show
                                          16   any anticompetitive effects caused by the alleged restraint
                                          17   without demonstrating some harm to these consumers.       The evidence
                                          18   cited above demonstrates that student-athletes themselves are
                                          19   harmed by the price-fixing agreement among FBS football and
                                          20   Division I basketball schools.    In the complex exchange
                                          21   represented by a recruit’s decision to attend and play for a
                                          22   particular school, the school provides tuition, room and board,
                                          23   fees, and book expenses, often at little or no cost to the school.
                                          24   The recruit provides his athletic performance and the use of his
                                          25   name, image, and likeness.    However, the schools agree to value
                                          26   the latter at zero by agreeing not to compete with each other to
                                          27   credit any other value to the recruit in the exchange.          This is an
                                          28   anticompetitive effect.   Thus, the Court finds that the NCAA has

                                                                                  22
                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page23 of 99




                                           1   the power -- and exercises that power -- to fix prices and
                                           2   restrain competition in the college education market that
                                           3   Plaintiffs have identified.
                                           4         Dr. Noll testified that elite football and basketball
                                           5   recruits -- the buyers in Plaintiffs’ college education market --
                                           6   could also be characterized as sellers in an almost identical
                                           7   market for their athletic services and licensing rights.        Id.
                                           8   143:21-144:8.   In that market, FBS football and Division I
                                           9   basketball schools are buyers seeking to acquire recruits’
                                          10   athletic services and licensing rights, paying for them with full
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                                          11   grants-in-aid but no more.    From that perspective, the NCAA’s
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                                          12   restrictions on student-athlete compensation still represent a
                                          13   form of price fixing but create a buyers’ cartel, rather than a
                                          14   sellers’ cartel.   Just as in Plaintiffs’ college education market,
                                          15   schools would engage in price competition in the market for
                                          16   recruits’ athletic services and licensing rights if there were no
                                          17   restrictions on student-athlete compensation; the only difference
                                          18   would be that they would be viewed as buyers in the transactions
                                          19   rather than sellers.   Thus, because Plaintiffs’ college education
                                          20   market is essentially a mirror image of the market for recruits’
                                          21   athletic services and licensing rights, the Court finds that the
                                          22   NCAA exercises market power, fixes prices, and restrains
                                          23   competition in both markets.
                                          24   IV.   Asserted Purposes of the Restraint
                                          25         The NCAA asserts that the challenged restrictions on student-
                                          26   athlete compensation are reasonable because they are necessary to
                                          27   preserve its tradition of amateurism, maintain competitive balance
                                          28   among FBS football and Division I basketball teams, promote the

                                                                                  23
                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page24 of 99




                                           1   integration of academics and athletics, and increase the total
                                           2   output of its product.
                                           3           A.   Preservation of Amateurism
                                           4           The NCAA asserts that its challenged rules promote consumer
                                           5   demand for its product by preserving its tradition of amateurism
                                           6   in college sports.    It relies on historical evidence, consumer
                                           7   survey data, and lay witness testimony to support this assertion.
                                           8   The Court does not find this evidence sufficient to justify the
                                           9   challenged restraint.
                                          10           Dr. Emmert testified that “the rules over the hundred-year
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                                          11   history of the NCAA around amateurism have focused on, first of
    United States District Court




                                          12   all, making sure that any resources that are provided to a
                                          13   student-athlete are only those that are focused on his or her
                                          14   getting an education.”    Trial Tr. 1737:8-:12.    The historical
                                          15   evidence presented at trial, however, demonstrates that the
                                          16   association’s amateurism rules have not been nearly as consistent
                                          17   as Dr. Emmert represents.    In fact, these rules have changed
                                          18   numerous times since the NCAA -- then known as the Intercollegiate
                                          19   Athletic Association (IAA) -- enacted its first set of bylaws in
                                          20   1906.    The IAA’s first bylaws governing amateurism provided,
                                          21                No student shall represent a College or
                                                            University in an intercollegiate game or
                                          22                contest who is paid or receives, directly or
                                                            indirectly, any money or financial concession
                                          23                or emolument as past or present compensation
                                                            for, or as prior consideration or inducement
                                          24                to play in, or enter any athletic contest,
                                                            whether the said remuneration be received
                                          25                from, or paid by, or at the instance of any
                                                            organization, committee or faculty of such
                                          26                College or University, or any individual
                                                            whatever.
                                          27

                                          28

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page25 of 99




                                           1   Stip. Undisputed Facts ¶¶ 6-7.    This rule would have barred even
                                           2   today’s athletic scholarships.    Despite the breadth of this
                                           3   written prohibition, the IAA’s member schools recruited students
                                           4   using “player subsidies” and other illicit forms of payment.         Id.
                                           5   ¶ 10.
                                           6           In 1916, after changing its name to the NCAA, the association
                                           7   adopted a new rule stating that an amateur was “one who
                                           8   participates in competitive physical sports only for pleasure, and
                                           9   the physical, mental, moral, and social benefits directly derived
                                          10   therefrom.”    Id.   The NCAA amended that definition in 1922 to
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                                          11   define an amateur as “one who engages in sport solely for the
    United States District Court




                                          12   physical, mental or social benefits he derives therefrom, and to
                                          13   whom the sport is nothing more than an avocation.”       Id. ¶ 14.
                                          14           Most schools continued to ignore these rules for the first
                                          15   few decades of the NCAA’s existence.     Id. ¶¶ 17-20.    Then, in
                                          16   1948, the NCAA enacted a strict set of rules known as the “Sanity
                                          17   Code” designed to curb violations of its bylaws.       Id. ¶ 20.   The
                                          18   Sanity Code “required that financial aid be awarded without
                                          19   consideration of athletics ability,” which, again, would have
                                          20   prohibited today’s athletic scholarships.      Id.   The NCAA repealed
                                          21   the Sanity Code the following year and, in 1952, created its first
                                          22   enforcement committee to address and prevent rules infractions.
                                          23   Id. ¶ 24.
                                          24           In 1956, the NCAA enacted a new set of amateurism rules
                                          25   permitting schools to award athletic scholarships to student-
                                          26   athletes.    Id. ¶ 25.   These rules established a national standard
                                          27   governing athletics-based financial aid and imposed a limit on the
                                          28   size of athletic scholarships that schools were permitted to

                                                                                  25
                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page26 of 99




                                           1   offer.    Id.   That limit -- now known as a full “grant-in-aid” --
                                           2   precluded student-athletes from receiving any financial aid beyond
                                           3   that needed for “commonly accepted educational expenses,”
                                           4   including tuition, fees, room and board, books, and cash for
                                           5   incidental expenses such as laundry.     Id.
                                           6        The NCAA continued to revise its scholarship limits after
                                           7   implementing the grant-in-aid limit in 1956. In 1975, for
                                           8   instance, it removed the cash for incidental expenses from the
                                           9   full grant-in-aid.    Walter Byers Depo. 21:21-22:14, 24:6-:17.     It
                                          10   amended the grant-in-aid rules again in 2004 by allowing student-
For the Northern District of California




                                          11   athletes who receive federal Pell grants to receive total
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                                          12   assistance in excess of a full grant-in-aid and even in excess of
                                          13   the cost of attendance.    Trial Tr. 161:10-162:4 (Noll); Ex. 2340
                                          14   at 208.   As a result, student-athletes who qualify for a Pell
                                          15   grant are now eligible to receive a full grant-in-aid plus the
                                          16   value of their Pell grant -- currently, just over $5,500 -- even
                                          17   if that total exceeds the cost of attendance.      Trial Tr.
                                          18   1573:8-:16 (Pastides); Ex. 2340 at 208.      The NCAA amended its
                                          19   rules again in 2013 to permit different levels of compensation for
                                          20   recruits in different sports.    The new rules permit Division I
                                          21   tennis recruits to earn up to ten thousand dollars per year in
                                          22   prize money from athletic events before they enroll in college.
                                          23   Ex. 2340 at 75.    Other Division I recruits, in contrast, remain
                                          24   barred from receiving any prize money in excess of their actual
                                          25   and necessary costs of competing in an event.      Id.
                                          26        The amateurism provision in the NCAA’s current constitution
                                          27   states that student-athletes “shall be amateurs in an
                                          28   intercollegiate sport, and their participation should be motivated

                                                                                  26
                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page27 of 99




                                           1   primarily by education and by the physical, mental and social
                                           2   benefits to be derived.   Student participation in intercollegiate
                                           3   athletics is an avocation, and student-athletes should be
                                           4   protected from exploitation by professional and commercial
                                           5   enterprises.”   Ex. 2340 at 18.   This conception of amateurism
                                           6   stands in stark contrast to the definitions set forth in the
                                           7   NCAA’s early bylaws.   Indeed, education -- which the NCAA now
                                           8   considers the primary motivation for participating in
                                           9   intercollegiate athletics -- was not even a recognized motivation
                                          10   for amateur athletes during the years when the NCAA prohibited
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                                          11   athletic scholarships.    The Court finds that the NCAA’s current
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                                          12   restrictions on student-athlete compensation, which cap athletics-
                                          13   based financial aid below the cost of attendance, are not
                                          14   justified by the definition of amateurism set forth in its current
                                          15   bylaws.
                                          16        Although the NCAA sought to establish the importance of these
                                          17   restrictions by asserting that they increase consumer interest in
                                          18   FBS football and Division I basketball, its evidence supporting
                                          19   this assertion is unpersuasive.    It presented testimony from a
                                          20   survey research expert, Dr. J. Michael Dennis, who conducted a
                                          21   survey of consumer attitudes concerning college sports in 2013.
                                          22   Dr. Dennis surveyed 2,455 respondents across the United States and
                                          23   observed that they generally opposed the idea of paying college
                                          24   football and basketball players.     Trial Tr. 2613:24-2614:6.   His
                                          25   survey contained an initial question that apparently affected many
                                          26   respondents’ answers to the survey’s substantive questions.      The
                                          27   initial open-ended question asked respondents what they had heard
                                          28   about student-athletes being paid.      Id. 2716:15-2717:7; Exs. 2629,

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                                           1   2630.    Plaintiffs’ survey expert, Hal Poret, noted that the
                                           2   “single most common response” to this question was that
                                           3   respondents had heard about student-athletes receiving some form
                                           4   of illegal or illicit payments.    Trial Tr. 2714:2-:20; Ex. 2629.
                                           5   Many other respondents mentioned paying student-athletes a salary.
                                           6   Trial Tr. 2714:21-2715:2 (Poret); Ex. 2630.      Although Dr. Dennis
                                           7   testified that his results remained the same even after he removed
                                           8   these specific 274 respondents from his sample, the fact that
                                           9   these respondents expressly mentioned illicit payments or salaries
                                          10   at the start of the survey strongly suggests that the question
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                                          11   primed respondents to think about such illicit payments when
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                                          12   answering the other survey questions.
                                          13           The NCAA relies heavily on the fact that sixty-nine percent
                                          14   of respondents to Dr. Dennis’s survey expressed opposition to
                                          15   paying student-athletes while only twenty-eight percent favored
                                          16   paying them.    Trial Tr. 2604:21-2605:2; Ex. 4045 at 19.       These
                                          17   responses, however, are not relevant to the specific issues raised
                                          18   here and say little about how consumers would actually behave if
                                          19   the NCAA’s restrictions on student-athlete compensation were
                                          20   lifted.    Although Dr. Dennis testified that these responses were
                                          21   consistent with those observed in other polls and surveys
                                          22   concerning college sports, he acknowledged that those other
                                          23   studies may “vary in their quality or their methodology and their
                                          24   implementation.”    Trial Tr. 2641:24-2642:11; Ex. 4045 at 20.
                                          25   Accordingly, the Court does not find these findings to be credible
                                          26   evidence that consumer demand for the NCAA’s product would
                                          27   decrease if student-athletes were permitted to receive
                                          28   compensation.

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                                           1        The most relevant questions in Dr. Dennis’s survey asked
                                           2   respondents specifically whether they would be more or less likely
                                           3   to watch, listen to, or attend college football and basketball
                                           4   games if student-athletes were paid.     Thirty-eight percent of all
                                           5   respondents stated they would be less likely to watch, listen to,
                                           6   or attend games if student-athletes were paid $20,000 per year.
                                           7   Ex. 4045 at 23.    Forty-seven percent stated that they would be
                                           8   less likely to watch, listen to, or attend games if student-
                                           9   athletes were paid $50,000 per year.     Id.   In contrast, only about
                                          10   four or five percent of respondents said that they would be more
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                                          11   likely to watch, listen to, or attend games if student-athletes
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                                          12   were paid $20,000 or $50,000 per year.     Trial Tr. 2651:14-2652:8
                                          13   (Dennis).   The remaining respondents stated that they would be no
                                          14   more or less likely to watch, listen to, or attend games if
                                          15   student-athletes were paid these amounts.      Id.
                                          16        While these questions are more germane to consumer behavior
                                          17   than the survey’s findings about respondents’ general opinions
                                          18   about compensating student-athletes, they still do not credibly
                                          19   establish that the specific rules challenged here contribute to
                                          20   consumer demand.    Dr. Dennis did not ask respondents for their
                                          21   opinions about providing student-athletes with a share of
                                          22   licensing revenue generated from the use of their own names,
                                          23   images, and likenesses.   Id. 2669:15-:18 (Dennis); 2709:6-:18
                                          24   (Poret).    Nor did he ask their opinions about paying student-
                                          25   athletes the full cost of attendance, or any amount less than
                                          26   $20,000 per year.   Dr. Dennis also failed to ask respondents how
                                          27   their behavior would be affected if small or large amounts of
                                          28   compensation for the use of student-athletes’ names, images, and

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                                           1   likenesses were held in trust for them until they left school --
                                           2   one of Plaintiffs’ proposed alternatives here.      Id. 2686:18-2687:3
                                           3   (Dennis); 2711:21-2712:9, 2718:19-2714:12 (Poret).
                                           4        In addition, numerous respondents provided internally
                                           5   inconsistent responses to different survey questions.       Eighty-
                                           6   three of the respondents who said that they favored paying
                                           7   student-athletes also stated that they would be less likely to
                                           8   watch, listen to, or attend games if student-athletes were paid.
                                           9   Id. 2729:25-2730:9.   Another thirty-three respondents stated that
                                          10   they opposed paying student-athletes but said that they would be
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                                          11   more likely to watch, listen to, or attend games if student-
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                                          12   athletes were paid.   Id.   These responses suggest that some
                                          13   respondents did not understand or did not take seriously some of
                                          14   the survey questions and illustrate the limits of Dr. Dennis’s
                                          15   conclusions.
                                          16        Based on these flaws in Dr. Dennis’s survey, the Court finds
                                          17   that it does not provide credible evidence that demand for the
                                          18   NCAA’s product would decrease if student-athletes were permitted,
                                          19   under certain circumstances, to receive a limited share of the
                                          20   revenue generated from the use of their own names, images, and
                                          21   likenesses.    Although Plaintiffs did not provide their own opinion
                                          22   survey to counter Dr. Dennis’s survey, the Court notes that the
                                          23   NCAA produced Dr. Dennis’s survey as a rebuttal report, which may
                                          24   have limited Plaintiffs’ opportunity to commission such a survey.
                                          25   What’s more, Dr. Dennis himself acknowledged that it would be
                                          26   extremely difficult to ask the specific kinds of detailed survey
                                          27   questions most relevant to this case -- specifically, those
                                          28

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                                           1   relating to varying amounts and methods of payment for the use of
                                           2   student-athletes’ names, images, and likenesses.
                                           3        Plaintiffs presented other evidence illustrating the limits
                                           4   of opinion surveys as predictors of consumer demand for sports-
                                           5   entertainment products.   Their expert on sports management, Dr.
                                           6   Daniel Rascher, described how opinion surveys conducted between
                                           7   1970 and the present consistently showed that the public
                                           8   overwhelmingly opposed rising baseball player salaries but
                                           9   continued to watch, listen to, and attend Major League Baseball
                                          10   games at a high rate even as player salaries rose during this
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                                          11   period.   Id. 901:12-903:24; Ex. 2549.    He specifically noted that
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                                          12   many people felt that the removal of the reserve clause in the
                                          13   1970s -- which ultimately enabled players to become free agents,
                                          14   thus leading to higher salaries -- would undermine the popularity
                                          15   of professional baseball.    However, despite these predictions and
                                          16   fans’ stated opposition to rising salaries, Major League Baseball
                                          17   revenues continued to rise after the removal of the reserve
                                          18   clause.   Id. 903:13-:16 (“So even though the fans in polls say,
                                          19   ‘Hey, we don’t want the players to make so much money,’ ultimately
                                          20   they continue to watch on television, you know, buy tickets,
                                          21   concessions, the whole thing.” (internal quotation marks added)).
                                          22   Dr. Rascher highlighted another survey showing public opposition
                                          23   to the decision of the International Olympic Committee (IOC) to
                                          24   permit professional athletes to compete in the Olympics, even as
                                          25   consumer interest in the Olympics remained high and revenues
                                          26   generated by the event continued to rise during the same period.
                                          27   Id. 904:22-905:18; see also id. 226:15-227:17 (testimony of Dr.
                                          28   Noll that the Olympics are “much more popular now than they were

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page32 of 99




                                           1   [when] amateur”).   In addition to the Olympics, Dr. Rascher also
                                           2   pointed to various other formerly amateur sports associations --
                                           3   such as those governing rugby and tennis -- whose events grew in
                                           4   popularity after they began to allow their athletes to accept
                                           5   payments.   Id. 903:25-904:21.
                                           6        Although the NCAA presented evidence showing that the Nielsen
                                           7   ratings for professional baseball and the Olympics have declined
                                           8   since the 1970s and 1980s, this does not cast doubt on Dr.
                                           9   Rascher’s findings.   As Dr. Rascher explained, Nielsen ratings
                                          10   measure the share of the population watching a particular event,
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                                          11   not the raw number of viewers.    Id. 986:7-:10, 1019:20-1020:9.   As
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                                          12   a result, Nielsen ratings have declined for virtually every
                                          13   television program or sporting event over the past few decades as
                                          14   the viewing population and number of television channels has
                                          15   grown.   Id.   Even a single event as popular as the Super Bowl,
                                          16   which has seen a dramatic increase in the raw number of viewers
                                          17   over the years, has experienced flat Nielsen ratings for several
                                          18   decades.    Id. 1024:18-1026:7, 1025:6-:15.
                                          19        Other historical evidence suggests that the NCAA’s
                                          20   restrictions on student-athlete compensation have not contributed
                                          21   significantly to the popularity of FBS football and Division I
                                          22   basketball.    The NCAA’s former president, the late Walter Byers,
                                          23   testified during his 2007 deposition, for instance, that the
                                          24   NCAA’s decision to remove incidental expenses from the grant-in-
                                          25   aid coverage in 1975 was not motivated by a desire to increase
                                          26   consumer demand for its product.     Byers Depo. 21:21-22:14,
                                          27   24:6-:17.   In fact, he specifically noted that NCAA sports
                                          28   experienced a tremendous growth in popularity during the period

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                                           1   between 1956 and 1975 when grants-in-aid still covered the full
                                                                                        7
                                           2   cost of attendance.    Id. 25:15-26:8.       None of the evidence in the
                                           3   trial record suggests that the removal of incidental expenses or
                                           4   any other changes to the grant-in-aid limit had an impact on the
                                           5   popularity of college sports during this time.
                                           6        Thus, the Court finds that the NCAA’s restrictions on
                                           7   student-athlete compensation are not the driving force behind
                                           8   consumer demand for FBS football and Division I basketball-related
                                           9   products.   Rather, the evidence presented at trial suggests that
                                          10   consumers are interested in college sports for other reasons.        Mr.
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                                          11   Pilson testified, for instance, that the popularity of college
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                                          12   sports is driven by feelings of “loyalty to the school,” which are
                                          13   shared by both alumni and people “who live in the region or the
                                          14   conference.”   Trial Tr. 757:20-758:13.       Similarly, Christine
                                          15   Plonsky, an associate athletics director at the University of
                                          16   Texas (UT), testified that UT sports would remain popular as long
                                          17   as they had “anything in our world to do with the University of
                                          18   Texas.”   Id. 1414:23-:24; see also id. 1376:13 (“Longhorns are
                                          19   pretty loyal.”).    Dr. Emmert himself noted that much of the
                                          20   popularity of the NCAA’s annual men’s basketball tournament stems
                                          21   from the fact that schools from all over the country participate
                                          22   “so the fan base has an opportunity to cheer for someone from
                                          23   their region of the country.”     Id. 1757:1-:9; see also id. (“It’s
                                          24   become extremely popular at least in part because there’s someone
                                          25

                                          26        7 The NCAA’s objections to this testimony under Federal Rules of
                                               Evidence 602 and 701 are overruled. Walter Byers was the executive
                                          27   director of the NCAA between 1956 and 1975, Stip. Undisputed Facts ¶ 23,
                                               and therefore had personal knowledge of the popularity of NCAA sports
                                          28   during this period.

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page34 of 99




                                           1   from your neighborhood likely to be in the tournament.”).        He
                                           2   testified that college bowl games have the same appeal.         Id.
                                           3   1757:16-:19.   This evidence demonstrates that the NCAA’s
                                           4   restrictions on student-athlete pay is not the driving force
                                           5   behind consumer interest in FBS football and Division I
                                           6   basketball.    Thus, while consumer preferences might justify
                                           7   certain limited restraints on student-athlete compensation, they
                                           8   do not justify the rigid restrictions challenged in this case.
                                           9        B.   Competitive Balance
                                          10        The NCAA asserts that its challenged restraints are
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                                          11   reasonable and procompetitive because they are needed to maintain
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                                          12   the current level of competitive balance among FBS football and
                                          13   Division I basketball teams.    It further asserts that it must
                                          14   maintain this particular level of competitive balance in order to
                                          15   sustain consumer demand for its product.
                                          16        The Court finds that the NCAA’s current restrictions on
                                          17   student-athlete compensation do not promote competitive balance.
                                          18   As Dr. Noll testified, since the 1970s, numerous sports economists
                                          19   have studied the NCAA’s amateurism rules and nearly all have
                                          20   concluded that the rules have no discernible effect on the level
                                          21   of competitive balance.    Trial Tr. 229:8-234:2.     He noted that one
                                          22   of the more recent articles addressing the subject, a 2007 study
                                          23   by economist Jim Peach published in the Social Science Journal,
                                          24   found that there is “‘little evidence that the NCAA rules and
                                          25   regulations have promoted competitive balance in college athletics
                                          26   and no a priori reason to think that eliminating the rules would
                                          27   change the competitive balance situation.’”      Id. 232:22-233:1
                                          28   (quoting Peach article).    Dr. Rascher reached the same conclusion

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page35 of 99




                                           1   based on his review of the economics literature.       Id. 920:9-
                                           2   922:16.   He specifically cited one of the leading textbooks in the
                                           3   field of sports economics, by Rod Fort, which found that the
                                           4   NCAA’s restrictions on student-athlete pay do not appear to have
                                           5   any impact on competitive balance.      Id. 921:10-:18.
                                           6        The academic consensus on this issue is not surprising given
                                           7   that many of the NCAA’s other rules and practices suggest that the
                                           8   association is unconcerned with achieving competitive balance.
                                           9   Several witnesses testified that the restrictions on student-
                                          10   athlete compensation lead many schools simply to spend larger
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                                          11   portions of their athletic budgets on coaching, recruiting, and
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                                          12   training facilities.    Id. 296:14-297:18 (Noll); 865:11-866:2,
                                          13   910:2-911:7 (Rascher).   In the major conferences, for instance,
                                          14   the average salary for a head football coach exceeds $1.5 million.
                                          15   Id. 1151:20-1152:14 (Staurowsky).       The fact that high-revenue
                                          16   schools are able to spend freely in these other areas cancels out
                                          17   whatever leveling effect the restrictions on student-athlete pay
                                          18   might otherwise have.    The NCAA does not do anything to rein in
                                          19   spending by the high-revenue schools or minimize existing
                                          20   disparities in revenue and recruiting.      In fact, Dr. Emmert
                                          21   specifically conceded that it is “not the mission of the
                                          22   association to . . . try and take away the advantages of a
                                          23   university that’s made a significant commitment to facilities and
                                          24   tradition and all of the things that go along with building a
                                          25   program.”   Trial Tr. 1774:23-1775:6.
                                          26        This same sentiment underlies the NCAA’s unequal revenue
                                          27   distribution formula, which rewards the schools and conferences
                                          28   that already have the largest athletic budgets.       Revenues

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page36 of 99




                                           1   generated from the NCAA’s annual Division I men’s basketball
                                           2   tournament are distributed to the conferences based on how their
                                           3   member schools performed in the tournament in recent years.
                                           4   Docket No. 207, Stip. Re: Broadcast Money, at ¶ 10.       As a result,
                                           5   the major conferences -- and the highest revenue schools --
                                           6   typically receive the greatest payouts, which hinders, rather than
                                           7   promotes, competitive balance.
                                           8        The only quantitative evidence that the NCAA presented
                                           9   related to competitive balance is a cursory statistical analysis
                                          10   conducted by Dr. Rubinfeld comparing the levels of competitive
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                                          11   balance in FBS football and Division I basketball to the levels in
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                                          12   the NFL and NBA.   Nothing in Dr. Rubinfeld’s analysis suggests
                                          13   that the NFL and NBA -- each of which has fewer teams than
                                          14   Division I -- provide an appropriate baseline for comparing
                                          15   competitive balance.   More importantly, his analysis does not
                                          16   suggest that the NCAA’s challenged rules actually produce the
                                          17   levels of competitive balance he observed.
                                          18        Even if the NCAA had presented some evidence of a causal
                                          19   connection between its challenged rules and its current level of
                                          20   competitive balance, it has not shown that the current level of
                                          21   competitive balance is necessary to maintain its current level of
                                          22   consumer demand.   Trial Tr. 228:20-229:2 (Noll).      It is undisputed
                                          23   that the ideal level of competitive balance for a sports league is
                                          24   somewhere between perfect competitive balance (where every team
                                          25   has an equal chance of winning every game) and perfect imbalance
                                          26   (where every game has a predictable outcome).      Id. 453:8-:22
                                          27   (Noll); 3127:2-:21 (Rubinfeld).    The NCAA has not even attempted
                                          28   to identify the specific level of competitive balance between

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page37 of 99




                                           1   those extremes that is ideal or necessary to sustain its current
                                           2   popularity.   Given the lack of such evidence in the record, the
                                           3   Court finds that the NCAA’s challenged rules are not needed to
                                           4   achieve a level of competitive balance necessary, or even likely,
                                           5   to maintain current levels of consumer demand for FBS football and
                                           6   Division I basketball.
                                           7        C.   Integration of Academics and Athletics
                                           8        The NCAA contends that its restrictions on student-athlete
                                           9   compensation are reasonable and procompetitive because they
                                          10   promote the integration of academics and athletics.       In
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                                          11   particular, it asserts that its challenged rules ensure that
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                                          12   student-athletes are able to obtain all of the educational
                                          13   benefits that their schools provide and participate in their
                                          14   schools’ academic communities.    According to the NCAA, the
                                          15   integration of academics and athletics increases the quality of
                                          16   the educational services its member schools provide to student-
                                          17   athletes in the college education market that Plaintiffs have
                                          18   identified.
                                          19        For support, the NCAA relies on evidence showing that
                                          20   student-athletes receive both short-term and long-term benefits
                                          21   from being student-athletes.    One of its experts, Dr. James
                                          22   Heckman, testified that participation in intercollegiate athletics
                                          23   leads to better academic and labor market outcomes for many
                                          24   student-athletes as compared to other members of their
                                          25   socioeconomic groups.    Trial Tr. 1493:13-1494:25.     Dr. Heckman
                                          26   found that these benefits are particularly pronounced for student-
                                          27   athletes from disadvantaged backgrounds.      Id.   The NCAA presented
                                          28   additional evidence, including its own data on student-athlete

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page38 of 99




                                           1   graduation rates, to show that student-athletes enjoy substantial
                                           2   benefits from participating in intercollegiate athletics.
                                           3   However, none of this data nor any of Dr. Heckman’s observations
                                           4   suggests that student-athletes benefit specifically from the
                                           5   restrictions on student-athlete compensation that are challenged
                                           6   in this case.   To the contrary, Dr. Heckman specifically testified
                                           7   that the long-term educational and academic benefits that student-
                                           8   athletes enjoy stem from their increased access to financial aid,
                                           9   tutoring, academic support, mentorship, structured schedules, and
                                          10   other educational services that are unrelated to the challenged
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                                          11   rules in this case.   Id. 1512:23-1516:17.     FBS football and
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                                          12   Division I basketball schools offer most of these services to
                                          13   their student-athletes independently and are not compelled to do
                                          14   so by the NCAA, particularly not by the challenged rules.
                                          15        The same is true of the various other benefits of integration
                                          16   that the NCAA has identified.    For instance, the benefits that
                                          17   student-athletes derive from interacting with faculty and non-
                                          18   student-athletes on campus are achieved mostly through the NCAA’s
                                          19   rules requiring student-athletes to attend class and meet certain
                                          20   academic requirements.   They are also achieved through the
                                          21   association’s rules prohibiting schools from creating dorms solely
                                          22   for student-athletes or from requiring student-athletes to
                                          23   practice more than a certain number of hours each week.         None of
                                          24   these rules is challenged here.
                                          25        The only evidence that the NCAA has presented that suggests
                                          26   that its challenged rules might be necessary to promote the
                                          27   integration of academics and athletics is the testimony of
                                          28   university administrators, who asserted that paying student-

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page39 of 99




                                           1   athletes large sums of money would potentially “create a wedge”
                                           2   between student-athletes and others on campus.      Id. 1591:2-:20
                                           3   (Pastides).    These administrators noted that, depending on how
                                           4   much compensation was ultimately awarded, some student-athletes
                                           5   might receive more money from the school than their professors.
                                           6   Student-athletes might also be inclined to separate themselves
                                           7   from the broader campus community by living and socializing off
                                           8   campus.
                                           9        It is not clear that any of the potential problems identified
                                          10   by the NCAA’s witnesses would be unique to student-athletes.          In
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                                          11   fact, when the Court asked Dr. Emmert whether other wealthy
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                                          12   students -- such as those who come from rich families or start
                                          13   successful businesses during school -- raise all of the same
                                          14   problems for campus relations, he replied that they did.        Id.
                                          15   1790:18-:22.   It is also not clear why paying student-athletes
                                          16   would be any more problematic for campus relations than paying
                                          17   other students who provide services to the university, such as
                                          18   members of the student government or school newspaper.
                                          19   Nonetheless, the Court finds that certain limited restrictions on
                                          20   student-athlete compensation may help to integrate student-
                                          21   athletes into the academic communities of their schools, which may
                                          22   in turn improve the schools’ college education product.
                                          23        Plaintiffs have produced anecdotal and statistical evidence
                                          24   suggesting that the NCAA’s current rules do not serve to integrate
                                          25   FBS football players or Division I basketball players into the
                                          26   academic communities at their schools.     For example, Ed O’Bannon,
                                          27   the former UCLA basketball star, testified that he felt like “an
                                          28   athlete masquerading as a student” during his college years.          Id.

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                                           1   33:11-:14.    Plaintiffs also presented testimony from Dr. Ellen
                                           2   Staurowsky, a sports management professor, who studied the
                                           3   experiences of FBS football and Division I basketball players and
                                           4   concluded that the time demands of their athletic obligations
                                           5   prevent many of them from achieving significant academic success.
                                           6   Id. 1175:12-1176:21.    Some of this evidence conflicts with the
                                           7   NCAA’s data on student-athlete graduation rates and Dr. Heckman’s
                                           8   observations surrounding academic outcomes for student-athletes.
                                           9   However, the Court need not resolve these factual disputes
                                          10   because, regardless of how they are resolved, the restraints on
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                                          11   student-athlete compensation challenged in this case generally do
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                                          12   not serve to enhance academic outcomes for student-athletes.
                                          13        D.      Increased Output
                                          14        The NCAA asserts that its challenged rules are reasonable and
                                          15   procompetitive because they enable it to increase the number of
                                          16   opportunities available to schools and student-athletes to
                                          17   participate in FBS football and Division I basketball, which
                                          18   ultimately increases the number of games that can be played.          It
                                          19   refers to this increased number of FBS football and Division I
                                          20   schools, student-athletes, and games as increased output.
                                          21        The Court finds that the NCAA’s restrictions on student-
                                          22   athlete compensation do nothing to increase this output.        The
                                          23   number of schools participating in FBS football and Division I
                                          24   basketball has increased steadily over time and continues to
                                          25   increase today.    Stip. Undisputed Facts ¶¶ 42-49.     This is because
                                          26   participation in FBS football and Division I basketball typically
                                          27   raises a school’s profile and leads to increased athletics-based
                                          28   revenue.   Trial Tr. 872:1-874:20 (Rascher).     Although Dr. Emmert

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                                           1   and other NCAA and conference officials say that this trend is not
                                           2   the result of increased Division I revenues but, rather, because
                                           3   of schools’ philosophical commitment to amateurism, this theory is
                                           4   implausible.   Id. 1783:2-:14; 2080:11-:23 (Delany); 2418:5-:25
                                           5   (Sankey); 3188:25-3189:17 (Lewis).      Schools in some of the major
                                           6   conferences have specifically undertaken efforts to change the
                                           7   NCAA’s existing scholarship rules, which suggests that the rules
                                           8   are not the reason that they choose to participate in Division I.
                                           9   Ex. 2095 at 4 (2013 presentation by representatives of the five
                                          10   major conferences requesting autonomy to raise existing
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                                          11   scholarship limits); Ex. 2527 at 2 (2014 letter from Pac 12 urging
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                                          12   other major conferences to support rule changes, including raising
                                          13   the grant-in-aid limit).    What’s more, there is no evidence to
                                          14   suggest that any schools joined Division I originally because of
                                          15   its amateurism rules.   These schools had numerous other options to
                                          16   participate in collegiate sports associations that restrict
                                          17   compensation for student-athletes, including the NCAA’s lower
                                          18   divisions and the NAIA.    Indeed, schools in FCS, Division II, and
                                          19   Division III are bound by the same amateurism provisions of the
                                          20   NCAA’s constitution as the schools in Division I.       The real
                                          21   difference between schools in Division I and schools in other
                                          22   divisions and athletics associations, as explained above, is the
                                          23   amount of resources that Division I schools commit to athletics.
                                          24   Thus, while there may be tangible differences between Division I
                                          25   schools and other schools that participate in intercollegiate
                                          26   sports, these differences are financial, not philosophical.
                                          27        For this reason, the NCAA’s assertion that schools would
                                          28   leave FBS and Division I for financial reasons if the challenged

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                                           1   restraints were removed is not credible.      The testimony of Dr.
                                           2   Emmert and various other athletics administrators that most
                                           3   Division I athletic programs operate at a loss and would not
                                           4   remain in Division I if the challenged rules were removed
                                           5   conflicts with the clear weight of the evidence.       Trial Tr.
                                           6   1784:6-:18 (Emmert); 3188:25-3189:3 (Lewis).      Indeed, some of the
                                           7   NCAA’s own witnesses undermined this claim.      Dr. Harris Pastides,
                                           8   the president of the University of South Carolina, for instance,
                                           9   specifically testified that his school “would probably continue to
                                          10   compete in football and men’s basketball” if the challenged
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                                          11   restrictions on student-athlete compensation were lifted.       Id.
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                                          12   1598:23-:25.   The commissioner of Conference USA, Britton
                                          13   Banowsky, similarly expressed skepticism that universities would
                                          14   leave Division I if the restrictions were removed.       Id. 2371:25-
                                          15   2372:20.   Ms. Plonsky also cast doubt on Dr. Emmert’s assertion
                                          16   that most Division I sports programs operate at a loss by noting
                                          17   that UT’s athletics department is not only self-sustaining but, in
                                          18   fact, generates surplus revenue that funds other university
                                          19   programs and expenses.   Id. 1385:12-:18, 1465:20-1466:10.      She
                                          20   indicated that UT was not abnormal in this regard and that the
                                          21   “vast proportion” of athletics programs across the country are
                                          22   operated by “self-sourced, self-generated” revenues.       Id. 1467:22-
                                          23   1468:11.   Mr. Lewis himself acknowledged that the NCAA’s revenues,
                                          24   most of which are distributed back to its member schools and
                                          25   conferences, have increased in recent years.      Id. 3195:19-3196:3.
                                          26        Dr. Rascher offered similar testimony and documented that
                                          27   participation in FBS football and Division I basketball generates
                                          28   significant revenue and is highly profitable for most schools.

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                                           1   Id. 830:4-831:15.      These revenues are what enable them to spend so
                                           2   much on coaches and training facilities.         Dr. Rascher also noted
                                           3   that most FBS football schools used to spend even more on their
                                           4   student-athletes before the NCAA lowered its team scholarship cap
                                           5   from 105 to eighty-five.       Id. 873:20-874:20.    Furthermore, Dr.
                                           6   Noll testified that some of the schools that currently compete in
                                           7   FBS and Division I do so without providing the maximum amount of
                                           8   financial aid permitted under NCAA rules.
                                           9          Based on this evidence, the Court finds that schools would
                                          10   not exit FBS football and Division I basketball if they were
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                                          11   permitted to pay their student-athletes a limited amount of
    United States District Court




                                          12   compensation beyond the value of their scholarships.          The NCAA’s
                                          13   challenged restrictions on compensation do not increase the number
                                          14   of opportunities for schools or student-athletes to participate in
                                          15   Division I.
                                          16   V.     Alternatives to the Restraint
                                          17          Plaintiffs have proposed three modifications to the NCAA’s
                                          18   challenged rules which, they contend, would allow the NCAA to
                                          19   achieve the purposes of its challenged rules in a less restrictive
                                          20   manner: (1) raise the grant-in-aid limit to allow schools to award
                                          21   stipends, derived from specified sources of licensing revenue, to
                                          22   student-athletes; (2) allow schools to deposit a share of
                                          23   licensing revenue into a trust fund for student-athletes which
                                          24   could be paid after the student-athletes graduate or leave school
                                          25   for other reasons; or (3) permit student-athletes to receive
                                          26   limited compensation for third-party endorsements approved by
                                          27   their schools.
                                          28

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                                           1        The Court finds that Plaintiffs’ first proposed
                                           2   alternative -- allowing schools to award stipends -- would limit
                                           3   the anticompetitive effects of the NCAA’s current restraint
                                           4   without impeding the NCAA’s efforts to achieve its stated
                                           5   purposes, provided that the stipends do not exceed the cost of
                                           6   attendance as that term is defined in the NCAA’s bylaws.        A
                                           7   stipend capped at the cost of attendance would not violate the
                                           8   NCAA’s own definition of amateurism because it would only cover
                                           9   educational expenses.    Indeed, as noted above, the NCAA’s member
                                          10   schools used to provide student-athletes with similar stipends
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                                          11   before the NCAA lowered its cap on grants-in-aid.       Byers Depo.
    United States District Court




                                          12   21:21-22:14, 24:6-:17.   Dr. Emmert testified that raising the
                                          13   grant-in-aid limit to cover the full cost of attendance would not
                                          14   violate the NCAA’s amateurism rules.     Trial Tr. 1742:15-:18.     Greg
                                          15   Sankey, the executive associate commissioner and chief operating
                                          16   officer of the SEC, expressed the same view during his testimony,
                                          17   as did Dr. Rubinfeld.    Id. 2430:23-:24 (Sankey); 3117:2-:4
                                          18   (Rubinfeld).
                                          19        None of the evidence presented at trial suggests that
                                          20   consumer demand for the NCAA’s product would decrease if schools
                                          21   were permitted to provide such stipends to student-athletes once
                                          22   again.   Nor does any of the evidence suggest that providing such
                                          23   stipends would hinder any school’s efforts to educate its student-
                                          24   athletes or integrate them into the academic community on campus.
                                          25   If anything, providing student-athletes with such stipends would
                                          26   facilitate their integration into academic life by removing some
                                          27   of the educational expenses that they would otherwise have to
                                          28   bear, such as school supplies, which are not covered by a full

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                                           1   grant-in-aid.    Ex. 2340 at 207.   Raising the grant-in-aid cap to
                                           2   allow for such stipends also would not have any effect on the
                                           3   NCAA’s efforts to achieve competitive balance or increase its
                                           4   output because, as explained above, its existing restrictions on
                                           5   student-athlete compensation do not advance these goals.
                                           6        Plaintiffs’ second proposed less restrictive alternative --
                                           7   allowing schools to hold payments in trust for student-athletes --
                                           8   would likewise enable the NCAA to achieve its goals in a less
                                           9   restrictive manner, provided the compensation was limited and
                                          10   distributed equally among team members.       The NCAA’s own witness,
For the Northern District of California




                                          11   Mr. Pilson, testified that he would not be troubled if schools
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                                          12   were allowed to make five thousand dollar payments to their
                                          13   student-athletes and that his general concerns about paying
                                          14   student-athletes would be partially assuaged if the payments were
                                          15   held in trust.   Trial Tr. 770:25-771:18.      Stanford’s athletic
                                          16   director, Bernard Muir, similarly acknowledged that his concerns
                                          17   about paying student-athletes varied depending on the size of the
                                          18   payments that they would receive.        Id. 254:3-:18 (“Where I set the
                                          19   dollar limit, you know, that varies, but it does concern me when
                                          20   we’re talking about six figures, seven figures in some cases.”).
                                          21   This testimony is consistent with Dr. Dennis’s general observation
                                          22   that, if the NCAA’s restrictions on student-athlete pay were
                                          23   removed, the popularity of college sports would likely depend on
                                          24   the size of payments awarded to student-athletes.       The Court
                                          25   therefore finds that permitting schools to make limited payments
                                          26   to student-athletes above the cost of attendance would not harm
                                          27   consumer demand for the NCAA’s product -- particularly if the
                                          28   student-athletes were not paid more or less based on their

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                                           1   athletic ability or the quality of their performances and the
                                           2   payments were derived only from revenue generated from the use of
                                           3   their own names, images, and likenesses.
                                           4        Holding these limited and equal shares of licensing revenue
                                           5   in trust until after student-athletes leave school would further
                                           6   minimize any potential impact on consumer demand.       Indeed, former
                                           7   student-athletes are already permitted to receive compensation for
                                           8   the use of their names, images, and likenesses in game re-
                                           9   broadcasts and other archival footage of their college
                                          10   performances as long as they enter into such agreements after they
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                                          11   leave school.   The popularity of college sports would not suffer
    United States District Court




                                          12   if current and future student-athletes were given the opportunity
                                          13   to receive compensation from their schools after they leave
                                          14   college.   Likewise, holding compensation in trust for student-
                                          15   athletes while they are enrolled would not erect any new barriers
                                          16   to schools’ efforts to educate student-athletes or integrate them
                                          17   into their schools’ academic communities.      The Court therefore
                                          18   finds that consumer demand for the NCAA’s products would not
                                          19   change if schools were allowed to offer and student-athletes on
                                          20   FBS football and Division I basketball teams were allowed, after
                                          21   leaving college, to receive limited and equal shares of licensing
                                          22   revenue generated from the use of their names, images, and
                                          23   likenesses during college.
                                          24        Although Drs. Emmert and Rubinfeld suggested that student-
                                          25   athletes could potentially monetize these future earnings while
                                          26   they are still in school by taking out loans against the trust,
                                          27   the NCAA could easily prohibit such borrowing, just as it
                                          28   currently prohibits student-athletes from borrowing against their

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                                           1   future earnings as professional athletes.      See Ex. 2340 at 236
                                           2   (prohibiting student-athletes from accepting any loan issued based
                                           3   on the “student-athlete’s athletics reputation, skill or pay-back
                                           4   potential as a future professional athlete”).      None of the NCAA’s
                                           5   witnesses testified that its current rules would not suffice to
                                           6   prevent student-athletes from borrowing against their future
                                           7   compensation.   Nor did they rule out that the NCAA and its member
                                           8   schools could place the money in a special account, such as a
                                           9   spendthrift trust, to prevent such borrowing.      Accordingly, the
                                          10   Court finds that allowing FBS football and Division I basketball
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                                          11   schools to hold in trust a limited and equal share of licensing
    United States District Court




                                          12   revenue for their recruits would provide a less restrictive means
                                          13   of achieving the NCAA’s stated purposes.
                                          14        Plaintiffs’ third proposed alternative, however -- allowing
                                          15   student-athletes to receive money for endorsements -- does not
                                          16   offer a less restrictive way for the NCAA to achieve its purposes.
                                          17   Allowing student-athletes to endorse commercial products would
                                          18   undermine the efforts of both the NCAA and its member schools to
                                          19   protect against the “commercial exploitation” of student-athletes.
                                          20   Although the trial record contains evidence -- and Dr. Emmert
                                          21   himself acknowledged -- that the NCAA has not always succeeded in
                                          22   protecting student-athletes from commercial exploitation, this
                                          23   failure does not justify expanding opportunities for commercial
                                          24   exploitation of student-athletes in the future.       Plaintiffs
                                          25   themselves previously indicated that they were not seeking to
                                          26   enjoin the NCAA from enforcing its current rules prohibiting such
                                          27   endorsements.   In light of this record, the Court finds that
                                          28

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                                           1   Plaintiffs’ third proposed less restrictive alternative does not
                                           2   offer the NCAA a viable means of achieving its stated goals.
                                           3                                 CONCLUSIONS OF LAW
                                           4   I.     Legal Standard under the Section 1 of the Sherman Act
                                           5          Section 1 of the Sherman Act makes it illegal to form any
                                           6   “contract, combination in the form of trust or otherwise, or
                                           7   conspiracy, in restraint of trade or commerce among the several
                                           8   States.”     15 U.S.C. § 1.    To prevail on a claim under this
                                           9   section, a plaintiff must show “‘(1) that there was a contract,
                                          10   combination, or conspiracy; (2) that the agreement unreasonably
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                                          11   restrained trade under either a per se rule of illegality or a
    United States District Court




                                          12   rule of reason analysis; and (3) that the restraint affected
                                          13   interstate commerce.’”      Tanaka v. Univ. of S. Cal., 252 F.3d 1059,
                                          14   1062 (9th Cir. 2001) (citing Hairston v. Pacific 10 Conference,
                                          15   101 F.3d 1315, 1318 (9th Cir. 1996)).
                                          16          In this case, Plaintiffs allege that the NCAA’s rules and
                                          17   bylaws operate as an unreasonable restraint of trade.          In
                                          18   particular, they seek to challenge the set of rules that preclude
                                          19   FBS football players and Division I men’s basketball players from
                                          20   receiving any compensation, beyond the value of their athletic
                                          21   scholarships, for the use of their names, images, and likenesses
                                          22   in videogames, live game telecasts, re-broadcasts, and archival
                                          23   game footage.     The NCAA does not dispute that these rules were
                                          24   enacted and are enforced pursuant to an agreement among its
                                          25   Division I member schools and conferences.         Nor does it dispute
                                          26   that these rules affect interstate commerce.         Accordingly, the
                                          27   only remaining question here is whether the challenged rules
                                          28   restrain trade unreasonably.

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                                           1        “The rule of reason is the presumptive or default standard”
                                           2   for making this determination.    California ex rel. Harris v.
                                           3   Safeway, Inc., 651 F.3d 1118, 1133 (9th Cir. 2011) (citing Texaco
                                           4   Inc. v. Dagher, 547 U.S. 1, 5 (2006)).     Although certain
                                           5   restraints may be examined under a truncated “quick look” or per
                                           6   se analysis, the Supreme Court has “expressed reluctance to adopt
                                           7   per se rules with regard to ‘restraints imposed in the context of
                                           8   business relationships where the economic impact of certain
                                           9   practices is not immediately obvious.’”      State Oil Co. v. Khan,
                                          10   522 U.S. 3, 10 (1997) (citing FTC v. Indiana Federation of
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                                          11   Dentists, 476 U.S. 447, 458-459 (1986)).      The Supreme Court has
    United States District Court




                                          12   specifically held that concerted actions undertaken by joint
                                          13   ventures should be analyzed under the rule of reason.       American
                                          14   Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 203 (2010)
                                          15   (“When ‘restraints on competition are essential if the product is
                                          16   to be available at all,’ per se rules of illegality are
                                          17   inapplicable, and instead the restraint must be judged according
                                          18   to the flexible Rule of Reason.” (citing NCAA v. Board of Regents
                                          19   of Univ. of Oklahoma, 468 U.S. 85, 101 (1984))).       Thus, as
                                          20   explained in prior orders, the Court analyzes the challenged
                                          21   restraint in this case under the rule of reason rather than a
                                          22   “quick look” or per se rule.    See Case No. 09-1967, Docket No.
                                          23   1025, April 11, 2014 Order, at 8-9; Case No. 09-1967, Docket No.
                                          24   151, Feb. 8, 2010 Order, at 9–10.
                                          25        “A restraint violates the rule of reason if the restraint’s
                                          26   harm to competition outweighs its procompetitive effects.”
                                          27   Tanaka, 252 F.3d at 1063.    Courts typically rely on a burden-
                                          28   shifting framework to conduct this balancing.      Under that

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                                           1   framework, the “plaintiff bears the initial burden of showing that
                                           2   the restraint produces ‘significant anticompetitive effects’
                                           3   within a ‘relevant market.’”      Id. (citing Hairston, 101 F.3d at
                                           4   1319).   If the plaintiff satisfies this initial burden, “the
                                           5   defendant must come forward with evidence of the restraint’s
                                           6   procompetitive effects.”    Id.   Finally, if the defendant meets
                                           7   this burden, the plaintiff must “show that ‘any legitimate
                                           8   objectives can be achieved in a substantially less restrictive
                                           9   manner.’”   Id. (citing Hairston, 101 F.3d at 1319).
                                          10   II.   Anticompetitive Effects in the Relevant Markets
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                                          11         “Proof that defendant’s activities had an impact upon
    United States District Court




                                          12   competition in the relevant market is ‘an absolutely essential
                                          13   element of the rule of reason case.’”     Supermarket of Homes, Inc.
                                          14   v. San Fernando Valley Bd. of Realtors, 786 F.2d 1400, 1405 (9th
                                          15   Cir. 1986) (citations omitted).     The term “relevant market,” in
                                          16   this context,
                                          17               “encompasses notions of geography as well as
                                                           product use, quality, and description. The
                                          18               geographic market extends to the area of
                                                           effective competition . . . where buyers can
                                          19               turn for alternative sources of supply. The
                                                           product market includes the pool of goods or
                                          20               services that enjoy reasonable
                                                           interchangeability of use and cross-elasticity
                                          21               of demand.”
                                          22   Tanaka, 252 F.3d at 1063 (quoting Oltz v. St. Peter’s Cmty. Hosp.,
                                          23   861 F.2d 1440, 1446 (9th Cir. 1988) (internal citations omitted)).
                                          24         Here, Plaintiffs allege that the challenged restraint causes
                                          25   anticompetitive effects in two related national markets: (1) the
                                          26   “college education market,” in which colleges and universities
                                          27   compete to recruit student-athletes to play FBS football or
                                          28   Division I basketball; and (2) the “group licensing market,” in

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                                           1   which videogame developers, television networks, and others
                                           2   compete for group licenses to use the names, images, and
                                           3   likenesses of FBS football and Division I men’s basketball players
                                           4   in videogames, telecasts, and clips.       The Court addresses each of
                                           5   these markets in turn.
                                           6        A.     College Education Market
                                           7               1.    Market Definition
                                           8        As outlined in the findings of fact, Plaintiffs produced
                                           9   sufficient evidence at trial to establish the existence of a
                                          10   national market in which NCAA Division I schools compete to sell
For the Northern District of California




                                          11   unique bundles of goods and services to elite football and
    United States District Court




                                          12   basketball recruits.    Specifically, these schools compete to offer
                                          13   recruits the opportunity to earn a higher education while playing
                                                                                                                8
                                          14   for an FBS football or Division I men’s basketball team.             In
                                          15   exchange, the recruits who accept these offers provide their
                                          16   schools with their athletic services and acquiesce in their
                                          17   schools’ use of their names, images, and likenesses while they are
                                          18   enrolled.   The recruits must also pay for any other costs of
                                          19   attendance not covered by their grants-in-aid.
                                          20        The NCAA contends that it does not restrain competition in
                                          21   this market.     In particular, it argues that FBS football and
                                          22   Division I basketball schools lack the power to fix prices in this
                                          23   market because they must compete with other colleges and
                                          24   universities -- such as those in other divisions and college
                                          25
                                                    8 This market could be divided into two submarkets -- one in which
                                          26   Division I basketball schools compete for elite basketball recruits and
                                               one in which FBS football schools compete for elite football recruits.
                                          27   However, because the parties’ evidence and arguments in this case apply
                                               generally to both of these submarkets, there is no need to subdivide the
                                          28   broader market for the purposes of this analysis.

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                                           1   athletic associations -- in supplying educational and athletic
                                           2   opportunities to elite recruits.     The NCAA also points to foreign
                                           3   professional sports leagues and domestic minor leagues which might
                                           4   likewise provide alternatives to playing FBS football or Division
                                           5   I basketball.   By failing to account for these other schools and
                                           6   leagues, the NCAA argues, Plaintiffs have defined the field of
                                           7   competition in the college education market too narrowly.
                                           8        The “field of competition” within a given product market
                                           9   consists of “the group or groups of sellers or producers who have
                                          10   actual or potential ability to deprive each other of significant
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                                          11   levels of business.”   Thurman Indus., Inc. v. Pay ‘N Pak Stores,
    United States District Court




                                          12   Inc., 875 F.2d 1369, 1374 (9th Cir. 1989).      This group is not
                                          13   limited to producers of the particular “product at issue” but also
                                          14   includes the producers of “all economic substitutes for the
                                          15   product.”   Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d
                                          16   1038, 1045 (9th Cir. 2008).    To determine whether a product has
                                          17   economic substitutes, courts typically consider two factors:
                                          18   “first, [the product’s] reasonable interchangeability for the same
                                          19   or similar uses; and second, cross-elasticity of demand, an
                                          20   economic term describing the responsiveness of sales of one
                                          21   product to price changes in another.”     Los Angeles Memorial
                                          22   Coliseum Comm’n v. Nat’l Football League, 726 F.2d 1381, 1393 (9th
                                          23   Cir. 1984); see also Brown Shoe Co. v. United States, 370 U.S.
                                          24   294, 325 (1962) (“The outer boundaries of a product market are
                                          25   determined by the reasonable interchangeability of use or the
                                          26   cross-elasticity of demand between the product itself and
                                          27   substitutes for it.”).   This analysis requires an examination of
                                          28   the price, use, and qualities of all potential substitutes for the

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                                           1   product at issue.   See Paladin Associates, Inc. v. Montana Power
                                           2   Co., 328 F.3d 1145, 1163 (9th Cir. 2003) (“For antitrust purposes,
                                           3   a ‘market is composed of products that have reasonable
                                           4   interchangeability for the purposes for which they are produced --
                                           5   price, use and qualities considered.’” (citations omitted)).      An
                                           6   analysis of these factors in the present case demonstrates that
                                           7   Plaintiffs have properly defined the scope of a relevant college
                                           8   education market.
                                           9        As set forth in the findings of fact, the product that FBS
                                          10   and Division I schools offer is unique.      The combination of
For the Northern District of California




                                          11   educational and athletic opportunities offered by schools outside
    United States District Court




                                          12   of FBS football and Division I -- including schools in FCS,
                                          13   Divisions II and III, and associations like the NAIA, USCAA,
                                          14   NJCAA, or NCCAA -- differ significantly in both price and quality
                                          15   from those offered by FBS and Division I schools.       Non-Division I
                                          16   schools typically offer a lower level of athletic competition,
                                          17   inferior training facilities, lower-paid coaches, and fewer
                                          18   opportunities to play in front of large crowds and on television.
                                          19   Furthermore, because many of these schools do not offer athletic
                                          20   scholarships, the cost of attending these institutions is much
                                          21   higher for many student-athletes than the cost of attending an FBS
                                          22   football or Division I basketball school.      This is why recruits
                                          23   who receive scholarship offers to play FBS football or Division I
                                          24   basketball rarely turn them down and, when they do, almost never
                                          25   do so to play football or basketball at a school outside of FBS or
                                          26   Division I.   In short, non-FBS and non-Division I schools do not
                                          27   compete with FBS and Division I schools in the recruiting market,
                                          28   just as they do not on the football field or the basketball court.

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                                           1        The same holds true for professional sports leagues such as
                                           2   the AFL, NBA D-League, and foreign football and basketball
                                           3   leagues.   These leagues do not offer recruits opportunities to
                                           4   earn a higher education or regularly showcase their athletic
                                           5   talents on national television.    The NCAA’s own evidence
                                           6   demonstrates that FBS football and Division I basketball command a
                                           7   significantly larger domestic television audience than virtually
                                           8   every other football or basketball league, with the exceptions of
                                           9   the NFL and NBA (neither of which permits an athlete to enter its
                                          10   league directly from high school).      The evidence shows that elite
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                                          11   football and basketball recruits rarely pursue careers in these
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                                          12   second-tier leagues immediately after high school and
                                          13   overwhelmingly prefer to play for FBS football teams and Division
                                          14   I basketball teams.
                                          15        In sum, the qualitative differences between the opportunities
                                          16   offered by FBS football and Division I basketball schools and
                                          17   those offered by other schools and sports leagues illustrate that
                                          18   FBS football schools and Division I basketball schools operate in
                                          19   a distinct market.    See Rock v. NCAA, 2013 WL 4479815, at *13
                                          20   (S.D. Ind.) (finding plaintiff’s allegations regarding “the
                                          21   superior competition, institutional support, overall preference,
                                          22   higher revenue, and more scholarship opportunities provided in
                                          23   Division I football, as opposed to Division II or NAIA football”
                                          24   sufficient to support his assertion that “Division II and NAIA
                                          25   football are not adequate substitutes for Division I football and,
                                          26   thus, not part of the same relevant market”); White v. NCAA, Case
                                          27   No. 06-999, Docket No. 72, at 3 (C.D. Cal. Sept. 20, 2006)
                                          28   (finding plaintiff’s allegations that student-athletes had no

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                                           1   reasonably interchangeable alternatives for the “unique
                                           2   combination of coaching-services and academics” offered by FBS
                                           3   football and Division I basketball schools sufficient to plead a
                                           4   relevant market).   So, too, does the fact that historic
                                           5   fluctuations in the price of attending FBS and Division I schools
                                           6   resulting from changes in the grant-in-aid limit have not caused
                                           7   large numbers of FBS football and Division I basketball recruits
                                           8   to migrate toward other schools or professional leagues.        See
                                           9   Trial Tr. 127:4-:17 (Noll); Lucas Auto. Engineering, Inc. v.
                                          10   Bridgestone/Firestone, Inc., 275 F.3d 762, 767 (9th Cir. 2001)
For the Northern District of California




                                          11   (“The determination of what constitutes the relevant product
    United States District Court




                                          12   market hinges, therefore, on a determination of those products to
                                          13   which consumers will turn, given reasonable variations in
                                          14   price.”).   Taken together, this evidence shows that the various
                                          15   schools and professional leagues that the NCAA has identified lack
                                          16   the power to deprive FBS football and Division I basketball
                                          17   schools of a significant number of recruits.      Accordingly, these
                                          18   other schools and leagues are not suppliers in the market that
                                          19   Plaintiffs have identified.
                                          20               2.   The Challenged Restraint
                                          21        Because FBS football and Division I basketball schools are
                                          22   the only suppliers in the relevant market, they have the power,
                                          23   when acting in concert through the NCAA and its conferences, to
                                          24   fix the price of their product.    They have chosen to exercise this
                                          25   power by forming an agreement to charge every recruit the same
                                          26   price for the bundle of educational and athletic opportunities
                                          27   that they offer: to wit, the recruit’s athletic services along
                                          28   with the use of his name, image, and likeness while he is in

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page56 of 99




                                           1   school.   If any school seeks to lower this fixed price -- by
                                           2   offering any recruit a cash rebate, deferred payment, or other
                                           3   form of direct compensation -- that school may be subject to
                                           4   sanctions by the NCAA.
                                           5        This price-fixing agreement constitutes a restraint of trade.
                                           6   The evidence presented at trial makes clear that, in the absence
                                           7   of this agreement, certain schools would compete for recruits by
                                           8   offering them a lower price for the opportunity to play FBS
                                           9   football or Division I basketball while they attend college.
                                          10   Indeed, the NCAA’s own expert, Dr. Rubinfeld, acknowledged that
For the Northern District of California




                                          11   the NCAA operates as a cartel that imposes a restraint on trade in
    United States District Court




                                          12   this market.
                                          13        Despite this undisputed evidence, the NCAA contends that its
                                          14   conduct does not amount to price-fixing because the price that
                                          15   most student-athletes actually pay is “at or close to zero” due to
                                          16   their athletic scholarships.    This argument mischaracterizes the
                                          17   commercial nature of the transactions between FBS football and
                                          18   Division I basketball schools and their recruits.       While it is
                                          19   true that many FBS football and Division I basketball players do
                                          20   not pay for tuition, room, or board in a traditional sense, they
                                          21   nevertheless provide their schools with something of significant
                                          22   value: their athletic services and the rights to use their names,
                                          23   images, and likenesses while they are enrolled.       They must also
                                          24   pay the incidental expenses of their college attendance.        The
                                          25   Seventh Circuit recently observed that these “transactions between
                                          26   NCAA schools and student-athletes are, to some degree, commercial
                                          27   in nature, and therefore take place in a relevant market with
                                          28   respect to the Sherman Act.”    Agnew v. NCAA, 683 F.3d 328, 341

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                                           1   (7th Cir. 2012).      The court reasoned that “the transactions those
                                           2   schools make with premier athletes -- full scholarships in
                                           3   exchange for athletic services -- are not noncommercial, since
                                           4   schools can make millions of dollars as a result of these
                                           5   transactions.”     Id. at 340.
                                           6          A court in the Central District of California similarly
                                           7   concluded that these transactions take place within a cognizable
                                           8   antitrust market.      In White, the court found that a group of
                                           9   student-athletes had stated a valid Sherman Act claim against the
                                          10   NCAA by alleging that its cap on the value of grants-in-aid
For the Northern District of California




                                          11   operated as a price-fixing agreement among FBS football and
    United States District Court




                                          12   Division I basketball schools.       Case No. 06-999, Docket No. 72, at
                                          13   4.    The court specifically rejected the NCAA’s argument that the
                                          14   plaintiffs had failed to allege a sufficient harm to competition.
                                          15   It explained,
                                          16                Plaintiffs’ [complaint] alleges that student-
                                                            athletes are consumers of the higher education
                                          17                and coaching services that the NCAA schools
                                                            provide. Plaintiffs allege that the GIA
                                          18                [grant-in-aid] cap operates to restrict the
                                                            price at which student-athletes purchase those
                                          19                services by forcing student-athletes to bear a
                                                            greater portion of the cost of attendance than
                                          20                they would have borne if the GIA cap had not
                                                            been in place. Taken in a light most
                                          21                favorable to the Plaintiffs, these allegations
                                                            suggest that the GIA cap harms would-be
                                          22                buyers, forcing them to pay higher prices than
                                                            would result from unfettered competition.
                                          23
                                               Id. (citations omitted).       The same reasoning governs here, where
                                          24
                                               Plaintiffs have shown that FBS football and Division I basketball
                                          25
                                               schools have fixed the price of their product by agreeing not to
                                          26
                                               offer any recruit a share of the licensing revenues derived from
                                          27
                                               the use of his name, image, and likeness.
                                          28

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                                           1        The fact that this price-fixing agreement operates by
                                           2   undervaluing the name, image, and likeness rights that the
                                           3   recruits provide to the schools -- rather than by explicitly
                                           4   requiring schools to charge a specific monetary price -- does not
                                           5   preclude antitrust liability here.      Federal antitrust law
                                           6   prohibits various kinds of price-fixing agreements, even indirect
                                           7   restraints on price.   See United States v. Socony-Vacuum Oil Co.,
                                           8   310 U.S. 150, 223 (1940) (“[T]he machinery employed by a
                                           9   combination for price-fixing is immaterial.      Under the Sherman Act
                                          10   a combination formed for the purpose and with the effect of
For the Northern District of California




                                          11   raising, depressing, fixing, pegging, or stabilizing the price of
    United States District Court




                                          12   a commodity in interstate or foreign commerce is illegal per
                                          13   se.”).   In Catalano, Inc. v. Target Sales, Inc., for instance, the
                                          14   Supreme Court held that an agreement among beer wholesalers to
                                          15   cease providing interest-free credits to retailers was “merely one
                                          16   form of price fixing” and could therefore be “presumed illegal”
                                          17   under § 1 of the Sherman Act.    446 U.S. 643, 650 (1980).      The
                                          18   Court reasoned that the “agreement to terminate the practice of
                                          19   giving credit is [] tantamount to an agreement to eliminate
                                          20   discounts, and thus falls squarely within the traditional per se
                                          21   rule against price fixing.”    Id. at 648; see also id. (“[C]redit
                                          22   terms must be characterized as an inseparable part of the
                                          23   price.”).   It noted that, prior to their agreement, the
                                          24   “wholesalers had competed with each other with respect to trade
                                          25   credit, and the credit terms for individual retailers had varied
                                          26   substantially.”   Id. at 644-45.   The agreement to eliminate this
                                          27   practice thus “extinguish[ed] one form of competition among the
                                          28   sellers” and could be presumed unlawful, even though it did not

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page59 of 99




                                           1   ultimately require the sellers to set their prices at some
                                           2   specific, pre-determined level.    Id.
                                           3        Like the wholesalers’ agreement in Catalano, the agreement
                                           4   among FBS football and Division I basketball schools not to offer
                                           5   recruits a share of their licensing revenue eliminates one form of
                                           6   price competition.   Although this agreement may operate to fix
                                           7   prices indirectly, rather than directly, it is nevertheless
                                           8   sufficient to satisfy Plaintiffs’ initial burden under the rule of
                                           9   reason.   Plaintiffs need not identify an agreement as obviously
                                          10   unlawful as the wholesalers’ agreement in Catalano to establish a
For the Northern District of California




                                          11   per se violation, let alone to meet the lower burden imposed by
    United States District Court




                                          12   the first step of a rule of reason analysis.      See 446 U.S. at 644-
                                          13   45 (“[W]e have held agreements to be unlawful per se that had
                                          14   substantially less direct impact on price than the agreement
                                          15   alleged in this case.”).
                                          16        Indeed, in another case involving concerted action by members
                                          17   of a sports league, then-Judge Sotomayor observed that an
                                          18   antitrust plaintiff may sometimes meet its burden by identifying
                                          19   an agreement to fix prices indirectly.     See Major League Baseball
                                          20   Properties, Inc. v. Salvino, Inc., 542 F.3d 290, 337 (2d Cir.
                                          21   2008) (Sotomayor, J., concurring).      In that case, the plaintiff
                                          22   sought to challenge an agreement among Major League Baseball teams
                                          23   to license their trademarks and other intellectual property
                                          24   exclusively through a designated third party called Major League
                                          25   Baseball Properties (MLBP).    The plaintiff alleged that the
                                          26   agreement violated the Sherman Act because it eliminated price
                                          27   competition among the teams as suppliers of intellectual property.
                                          28   A three-judge panel of the Second Circuit rejected this claim,

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                                           1   finding that the agreement did not constitute price-fixing.         In a
                                           2   separate concurrence, then-Judge Sotomayor noted that, although
                                           3   she agreed that the licensing arrangement was lawful, she believed
                                           4   that the majority had endorsed “an overly formalistic view of
                                           5   price fixing.”      Id. at 334.   She reasoned, “While the MLBP
                                           6   agreement does not specify a price to be charged, the effect of
                                           7   the agreement clearly eliminates price competition between the
                                           8   [teams] for trademark licenses.      An agreement to eliminate price
                                           9   competition from the market is the essence of price fixing.”        Id.
                                          10   at 335; see also id. at 336-37 (“In other words, an agreement
For the Northern District of California




                                          11   between competitors to ‘share profits’ or to make a third party
    United States District Court




                                          12   the exclusive seller of their competing products that has the
                                          13   purpose and effect of fixing, stabilizing, or raising prices may
                                          14   be a per se violation of the Sherman Act, even if no explicit
                                          15   price is referenced in the agreement.”).       Then-Judge Sotomayor
                                          16   also noted that such an agreement could be unlawful, even if it
                                          17   was only meant to bind members of a joint venture.        She explained,
                                          18              [T]he antitrust laws prohibit two companies A
                                                          and B, producers of X, from agreeing to set
                                          19              the price of X. Likewise, A and B cannot
                                                          simply get around this rule by agreeing to set
                                          20              the price of X through a third-party
                                                          intermediary or “joint venture” if the purpose
                                          21              and effect of that agreement is to raise,
                                                          depress, fix, peg, or stabilize the price of
                                          22              X.
                                                             9
                                          23   Id. at 336.       Although she ultimately concluded that the MLBP
                                          24   agreement served a procompetitive purpose, because it increased
                                          25

                                          26        9
                                                      The Supreme Court recently relied on this language from then-
                                               Judge Sotomayor’s concurrence in another Sherman Act case involving a
                                          27   challenge to concerted action by members of a sports league. American
                                               Needle, 560 U.S. at 202 (“[C]ompetitors ‘cannot simply get around’
                                          28   antitrust liability by acting ‘through a third-party intermediary or

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                                           1   the total number of licenses sold, her opinion nevertheless
                                           2   illustrates that price-fixing agreements take many forms and may
                                           3   be unlawful even if they are implemented by members of a joint
                                           4   venture.
                                           5        Although Plaintiffs have characterized FBS football and
                                           6   Division I basketball schools as sellers in the market for
                                           7   educational and athletic opportunities, in their post-trial brief
                                           8   they argued that the schools could alternatively be characterized
                                           9   as buyers in a market for recruits’ athletic services and
                                          10   licensing rights.    The relevant market would be that for the
For the Northern District of California




                                          11   recruitment of the highest ranked male high school football and
    United States District Court




                                          12   basketball players each year.     Viewed from this perspective,
                                          13   Plaintiffs’ antitrust claim arises under a theory of monopsony,
                                          14   rather than monopoly, alleging an agreement to fix prices among
                                          15   buyers rather than sellers.     Such an agreement, if proven, would
                                          16   violate § 1 of the Sherman Act just as a price-fixing agreement
                                          17   among sellers would.    See generally Omnicare, Inc. v. UnitedHealth
                                          18   Grp., Inc., 629 F.3d 697, 705 (7th Cir. 2011) (“Ordinarily, price-
                                          19   fixing agreements exist between sellers who collude to set their
                                          20   prices above or below prevailing market prices.        But buyers may
                                          21   also violate § 1 by forming what is sometimes known as a ‘buyers’
                                          22   cartel.’”); Vogel v. Am. Soc. of Appraisers, 744 F.2d 598, 601
                                          23   (7th Cir. 1984) (“Just as a sellers’ cartel enables the charging
                                          24   of monopoly prices, a buyers’ cartel enables the charging of
                                          25   monopsony prices; and monopoly and monopsony are symmetrical
                                          26   distortions of competition from an economic standpoint.”
                                          27
                                               ‘joint venture.’’” (quoting Salvino, 542 F.3d at 336 (Sotomayor, J.,
                                          28   concurring)).

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                                           1   (citations omitted)).   The Supreme Court has noted that the
                                           2   “kinship between monopoly and monopsony suggests that similar
                                           3   legal standards should apply to claims of monopolization and to
                                           4   claims of monopsonization.”    Weyerhaeuser Co. v. Ross-Simmons
                                           5   Hardwood Lumber Co., Inc., 549 U.S. 312, 322 (2007) (citing Roger
                                           6   G. Noll, “‘Buyer Power’ and Economic Policy,” 72 Antitrust L.J.
                                           7   589, 591 (2005)).
                                           8        In recent years, several courts have specifically recognized
                                           9   that monopsonistic practices in a market for athletic services may
                                          10   provide a cognizable basis for relief under the Sherman Act.      See,
For the Northern District of California




                                          11   e.g., Rock, 2013 WL 4479815, at *11 (finding that plaintiff had
    United States District Court




                                          12   identified a cognizable market in which “buyers of labor (the
                                          13   schools) are all members of NCAA Division I football and are
                                          14   competing for the labor of the sellers (the prospective student-
                                          15   athletes who seek to play Division I football)”); In re NCAA I-A
                                          16   Walk-On Football Players Litig., 398 F. Supp. 2d 1144, 1150 (W.D.
                                          17   Wash. 2005) (“Plaintiffs have alleged a sufficient ‘input’ market
                                          18   in which NCAA member schools compete for skilled amateur football
                                          19   players.”).   Indeed, the Seventh Circuit recently noted in Agnew
                                          20   that the “proper identification of a labor market for student-
                                          21   athletes . . . would meet plaintiffs’ burden of describing a
                                          22   cognizable market under the Sherman Act.”      683 F.3d at 346.   Given
                                          23   that Plaintiffs’ alternative monopsony theory mirrors their
                                          24   monopoly price-fixing theory, the evidence presented and facts
                                          25   found above are sufficient to establish a restraint of trade in a
                                          26   market for recruits’ athletic services just as they are to
                                          27   establish a restraint of trade in the college education market.
                                          28   As explained above, viewed from this perspective, the sellers in

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page63 of 99




                                           1   this market are the recruits; the buyers are FBS football and
                                           2   Division I basketball schools; the product is the combination of
                                           3   the recruits’ athletic services and licensing rights; and the
                                           4   restraint is the agreement among schools not to offer any recruit
                                           5   more than the value of a full grant-in-aid.      In the absence of
                                           6   this restraint, schools would compete against one another by
                                           7   offering to pay more for the best recruits’ athletic services and
                                           8   licensing rights -- that is, they would engage in price
                                           9   competition.
                                          10        The NCAA argues that Plaintiffs cannot prevail under a
For the Northern District of California




                                          11   monopsony theory because they have not presented evidence of an
    United States District Court




                                          12   impact on price or output in a “downstream market.”       Trial Tr.
                                          13   2766:16-:22 (Stiroh).   They cite Dr. Stiroh’s testimony that the
                                          14   only way that a restraint on an input market -- such as a market
                                          15   for recruits’ athletic services and licensing rights -- can give
                                          16   rise to an anticompetitive harm is if that restraint ultimately
                                          17   harms consumers by reducing output or raising prices in a
                                          18   downstream market.   Whatever merit Dr. Stiroh’s views might have
                                          19   among economists, they are not supported by the relevant case law.
                                          20   The Supreme Court has indicated that monopsonistic practices that
                                          21   harm suppliers may violate antitrust law even if they do not
                                          22   ultimately harm consumers.    In Mandeville Island Farms v. Am.
                                          23   Crystal Sugar Co., 334 U.S. 219 (1948), the Supreme Court
                                          24   considered whether an agreement among sugar refiners to fix the
                                          25   prices they paid for sugar beets constituted a violation of the
                                          26   Sherman Act.   It concluded that “the agreement is the sort of
                                          27   combination condemned by the Act, even though the price-fixing was
                                          28   by purchasers, and the persons specially injured . . . are

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page64 of 99




                                           1   sellers, not customers or consumers.”     Id. at 235.    Notably, the
                                           2   Court reached this conclusion despite a vehement dissent from
                                           3   Justice Jackson noting that the price of sugar had not been
                                           4   affected by the refiners’ agreement.     Id. at 247.    The majority’s
                                           5   decision, thus, “strongly suggests that suppliers . . . are
                                           6   protected by antitrust laws even when the anti-competitive
                                           7   activity does not harm end-users.”      Telecor Communications, Inc.
                                           8   v. Sw. Bell Tel. Co., 305 F.3d 1124, 1134 (10th Cir. 2002); see
                                           9   also Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 988
                                          10   (9th Cir. 2000) (“The Supreme Court’s references to the goals of
For the Northern District of California




                                          11   achieving ‘the lowest prices, the highest quality and the greatest
    United States District Court




                                          12   material progress’ and of ‘assur[ing] customers the benefits of
                                          13   price competition’ do not mean that conspiracies among buyers to
                                          14   depress acquisition prices are tolerated.      Every precedent in the
                                          15   field makes clear that the interaction of competitive forces, not
                                          16   price-rigging, is what will benefit consumers.” (emphasis added)).
                                          17        This is consistent with a long line of cases, including some
                                          18   decided by the Ninth Circuit, recognizing that restraints on
                                          19   competition within a labor market may give rise to an antitrust
                                          20   violation under § 1 of the Sherman Act.      See, e.g., Anderson v.
                                          21   Shipowners’ Ass’n, 272 U.S. 359, 365 (1926) (holding that a multi-
                                          22   employer agreement among ship owners restrained trade in a labor
                                          23   market for sailors); Todd v. Exxon Corp., 275 F.3d 191, 201 (2d
                                          24   Cir. 2001) (Sotomayor, J.) (holding that a conspiracy among oil
                                          25   industry employers to set salaries at “artificially low levels”
                                          26   restrained trade in a labor market and noting that “a horizontal
                                          27   conspiracy among buyers [of labor] to stifle competition is as
                                          28   unlawful as one among sellers”); Ostrofe v. H.S. Crocker Co.,

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page65 of 99




                                           1   Inc., 740 F.2d 739, 740 (9th Cir. 1984) (holding that a multi-
                                           2   employer agreement in the paper lithograph label industry may
                                           3   restrain trade in a “market for personal services”).       It is also
                                           4   consistent with the many recent cases, some of which are cited
                                           5   above, recognizing the validity of antitrust claims against the
                                           6   NCAA based on anticompetitive harms in a labor market.          See, e.g.,
                                           7   Agnew, 683 F.3d at 346 (recognizing that the NCAA’s scholarship
                                           8   rules may restrain trade in a “labor market for student-athletes”
                                           9   and noting that “labor markets are cognizable under the Sherman
                                          10   Act”); Law v. NCAA, 134 F.3d 1010, 1015 (10th Cir. 1998) (finding
For the Northern District of California




                                          11   that an NCAA rule capping compensation for entry-level coaches
    United States District Court




                                          12   restrained trade in a “labor market for coaching services” and
                                          13   noting that “[l]ower prices cannot justify a cartel’s control of
                                          14   prices charged by suppliers, because the cartel ultimately robs
                                          15   the suppliers of the normal fruits of their enterprises”); In re
                                          16   NCAA I-A Walk-On Football Players Litig., 398 F. Supp. 2d at 1150
                                          17   (recognizing that the NCAA’s scholarship rules may restrain trade
                                          18   in an “‘input’ market in which NCAA member schools compete for
                                          19   skilled amateur football players”).     In fact, a court in the
                                          20   Southern District of Indiana recently rejected the NCAA’s argument
                                          21   that a student-athlete would need to plead a “‘market-wide impact
                                          22   on the price or output of any commercial product’” in order to
                                          23   state a valid Sherman Act claim challenging its former prohibition
                                          24   on multi-year football scholarships.     Rock, 2013 WL 4479815, at
                                          25   *14 (S.D. Ind.) (quoting NCAA’s brief).      The court in that case
                                          26   found that the student-athlete’s complaint “adequately plead[]
                                          27   anticompetitive effects of the challenged bylaws” in the
                                          28   “‘nationwide market for the labor of Division I football student

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page66 of 99




                                           1   athletes’” based on his allegations that, in the absence of the
                                           2   challenged scholarship rules, the schools competing for his
                                           3   services would have offered him a multi-year scholarship.       Id. at
                                           4   *3, *15 (quoting complaint).    The court specifically noted that
                                           5   the plaintiff had identified a cognizable harm to competition by
                                           6   alleging that removing the challenged restraint would “would force
                                           7   the schools to ‘compete’ for recruits.”       Id. at *15.   Plaintiffs
                                           8   here have presented sufficient evidence to show an analogous
                                           9   anticompetitive effect in a similar labor market.       Accordingly,
                                          10   they have shown a cognizable harm to competition under the rule of
For the Northern District of California




                                          11   reason.
    United States District Court




                                          12        The Court notes that Plaintiffs had not articulated a
                                          13   monopsony theory prior to trial.      Their expert addressed it at
                                          14   trial in response to the Court’s questions.       For this reason, the
                                          15   Court has addressed Plaintiffs’ monopoly theory in greater detail.
                                          16   However, Plaintiffs presented significant evidence to support a
                                          17   monopsony theory during trial.    Both sides discussed the theory at
                                          18   length in their post-trial briefs.        The evidence presented at
                                          19   trial and the facts found here, as well as the law, support both
                                          20   theories.   The NCAA is not prejudiced by alternative reliance on a
                                          21   monopsony theory.
                                          22        B.     Group Licensing Market
                                          23        Plaintiffs also allege that the NCAA has restrained
                                          24   competition in three specific national submarkets of a broader
                                          25   national group licensing market: namely, the submarkets for group
                                          26   licenses to use student-athletes’ names, images, and likenesses in
                                          27   (1) live game telecasts, (2) videogames, and (3) game re-
                                          28

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                                           1   broadcasts, highlight clips, and other archival footage.          The
                                           2   Court addresses each of these submarkets separately.
                                           3              1.   Submarket for Group Licenses to Use Student-
                                                               Athletes’ Names, Images, and Likenesses in Live
                                           4                   Game Telecasts
                                           5        As noted above, television networks compete for the rights to
                                           6   telecast live FBS football and Division I basketball games.          In
                                           7   order to secure these rights, networks typically purchase licenses
                                           8   to use the intellectual property of the participating schools and
                                           9   conferences during the game telecast as well as the names, images,
                                          10   and likenesses of the participating student-athletes.10          Because
For the Northern District of California




                                          11   student-athletes are not permitted by NCAA rules to license the
    United States District Court




                                          12   rights to use their names, images, and likenesses, the networks
                                          13   deal exclusively with schools and conferences when acquiring the
                                          14   student-athletes’ rights.
                                          15        As the Court found above, in the absence of the NCAA’s
                                          16   restrictions on student-athlete compensation, student-athletes on
                                          17   certain FBS football and Division I basketball teams would be able
                                          18   to sell group licenses for the use of their names, images, and
                                          19   likenesses to television networks.       They would either sell those
                                          20   licenses to the television networks directly or do so through some
                                          21   intermediate buyer -- such as their school or a third-party
                                          22   licensing company -- which would bundle the group license with
                                          23   other intellectual property and performance rights and sell the
                                          24

                                          25        10
                                                       As discussed in the findings of fact, when a third party -- such
                                               as a bowl committee or the NCAA itself -- has organized a particular
                                          26   athletic event, the networks may also purchase a separate license from
                                               that party to use its intellectual property during the telecast.
                                          27   Because these transactions do not involve the transfer of rights to use
                                               student-athletes’ names, images, and likenesses, they are not relevant
                                          28   to this discussion.

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                                           1   full bundle of rights to the network.     Regardless of whether the
                                           2   student-athletes would sell their group licenses to the networks
                                           3   directly or through some intermediate buyer, however, a submarket
                                           4   for such group licenses would exist.
                                           5        The NCAA denies that such a market exists as a matter of law.
                                           6   It argues that the First Amendment and certain state laws preclude
                                           7   student-athletes from asserting any rights of publicity in the use
                                           8   of their names, images, and likenesses during live game telecasts.
                                           9   The Court has previously rejected this argument.       See April 11,
                                          10   2014 Order at 21.   Furthermore, even if some television networks
For the Northern District of California




                                          11   believed that student-athletes lacked publicity rights in the use
    United States District Court




                                          12   of their names, images, and likenesses, they may have still sought
                                          13   to acquire these rights as a precautionary measure.       Businesses
                                          14   often negotiate licenses to acquire uncertain rights.       See C.B.C.
                                          15   Distribution & Mktg., Inc. v. Major League Baseball Advanced
                                          16   Media, L.P., 505 F.3d 818, 826 (8th Cir. 2007) (Colloton, J.,
                                          17   dissenting) (“CBC surely can ‘agree,’ as a matter of good business
                                          18   judgment, to bargain away any uncertain First Amendment rights
                                          19   that it may have in exchange for the certainty of what it
                                          20   considers to be an advantageous contractual arrangement.”); Hynix
                                          21   Semiconductors, Inc. v. Rambus, Inc., 2006 WL 1991760, at *4 (N.D.
                                          22   Cal.) (crediting expert testimony that “a negotiating patentee and
                                          23   licensee generally agree to a lower royalty rate if there is
                                          24   uncertainty as to whether the patents are actually valid and
                                          25   infringed”).   The NCAA’s argument does not undermine Plaintiffs’
                                          26   evidence of the existence of a national submarket for group
                                          27   licenses.
                                          28

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page69 of 99




                                           1        That said, Plaintiffs have not identified any harm to
                                           2   competition in this submarket.    As previously noted, an “essential
                                           3   element of a Section 1 violation under the rule of reason is
                                           4   injury to competition in the relevant market.”      Alliance Shippers,
                                           5   Inc. v. S. Pac. Transp. Co., 858 F.2d 567, 570 (9th Cir. 1988).
                                           6   That injury must go “beyond the impact on the claimant” and reach
                                           7   “a field of commerce in which the claimant is engaged.”         Austin v.
                                           8   McNamara, 979 F.2d 728, 738 (9th Cir. 1992) (citations and
                                           9   quotation marks omitted); see also Sicor Ltd. v. Cetus Corp., 51
                                          10   F.3d 848, 854 (9th Cir. 1995) (“Under the rule of reason approach,
For the Northern District of California




                                          11   the plaintiff must show an injury to competition, rather than just
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                                          12   an injury to plaintiff’s business.” (emphasis in original;
                                          13   citations and quotation marks omitted)).      While Plaintiffs have
                                          14   shown that the NCAA’s challenged rules harm student-athletes by
                                          15   depriving them of compensation that they would otherwise receive,
                                          16   they have not shown that this harm results from a restraint on
                                          17   competition in the group licensing market.      In particular, they
                                          18   have failed to show that the challenged rules hinder competition
                                          19   among any potential buyers or sellers of group licenses.
                                          20        The sellers in this market would be the student-athletes.
                                          21   Plaintiffs have not presented any evidence to show that, in the
                                          22   absence of the challenged restraint, teams of student-athletes
                                          23   would actually compete against one another to sell their group
                                          24   licenses.   In fact, the evidence in the record strongly suggests
                                          25   that such competition would not occur.     This is because any
                                          26   network that seeks to telecast a particular athletic event would
                                          27   have to obtain a group license from every team that could
                                          28   potentially participate in that event.     For instance, a network

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page70 of 99




                                           1   seeking to telecast a conference basketball tournament would have
                                           2   to obtain group licenses from all of the teams in that conference.
                                           3   Under those circumstances, none of the teams in the conference
                                           4   would compete against each other as sellers of group licenses
                                           5   because the group licenses would constitute perfect complements:
                                           6   that is, every group license would have to be sold in order for
                                           7   any single group license to have value.      See generally Herbert
                                           8   Hovenkamp, “Implementing Antitrust’s Welfare Goals,” 81 Fordham L.
                                           9   Rev. 2471, 2487 (2013) (“Perfect complements are goods that are
                                          10   invariably used together -- or, more technically, situations in
For the Northern District of California




                                          11   which one good has no value unless it can be consumed together
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                                          12   with the other good.”).   At the same time, the teams in that
                                          13   conference would never have to compete with teams outside of the
                                          14   conference because those teams -- as non-participants in the
                                          15   conference tournament -- would not be able to sell their group
                                          16   licenses with respect to that event in the first place.         Thus, in
                                          17   this scenario, teams of student-athletes would never actually
                                          18   compete against each other as sellers of group licenses, even if
                                          19   the challenged NCAA rules no longer existed.
                                          20        The same outcome would result whenever any network sought to
                                          21   telecast any other FBS football and Division I basketball event.
                                          22   Although the specific set of group licenses required for each
                                          23   event would vary, the lack of competition among student-athlete
                                          24   teams would remain constant: in every case, the network would need
                                          25   to acquire group licenses from a specific set of teams, none of
                                          26   which would have any incentive to compete either against each
                                          27   other or against any teams whose group licenses were not required
                                          28   for the telecast.   These conditions would hold regardless of

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                                           1   whether the student-athlete teams sold their group licenses to the
                                           2   television networks directly or through some intermediary, such as
                                           3   their schools, because the demand for group licenses would be
                                           4   dictated primarily by the identity of the teams eligible to
                                           5   participate in each event.      To the extent that entire conferences
                                           6   might compete against each other in order to secure a specific
                                           7   telecasting contract with a particular network, the challenged
                                           8   NCAA rules do not inhibit this type of competition.        Conferences
                                           9   are already free to compete against each other in this way.       So,
                                          10   too, are any individual pairs of schools whose teams are scheduled
For the Northern District of California




                                          11   to play against each other in specific regular season games.       Like
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                                          12   the conferences, these pairs may freely compete against other
                                          13   pairs of schools whose games are scheduled for the same time in
                                          14   order to secure a contract with whatever networks can show games
                                                                        11
                                          15   during that time slot.        In any event, Plaintiffs have not
                                          16   presented sufficient evidence to show that student-athlete teams
                                          17   would actually compete against each other in any of these ways if
                                          18   they were permitted to sell group licenses to use their names,
                                          19   images, and likenesses.
                                          20        Plaintiffs have also failed to identify any situation in
                                          21   which buyers of group licenses might compete against each other.
                                          22   As noted above, there are two sets of potential buyers in this
                                          23   market: the television networks, which would buy group licenses
                                          24   directly from the student-athlete teams, and intermediate buyers,
                                          25
                                                    11 The evidence presented at trial suggests that most telecasting
                                          26   contracts, even for regular season games, are negotiated at the
                                               conference-wide level -- not the individual team level. Nevertheless,
                                          27   the Court notes that the challenged rules would not suppress competition
                                               in this market even if contracts to telecast regular season games were
                                          28   negotiated at the individual team level.

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                                           1   which would bundle those licenses with other rights and sell those
                                           2   bundles of rights to the networks.       The first set of potential
                                           3   buyers -- the television networks -- already compete freely
                                           4   against one another for the rights to use student-athletes’ names,
                                           5   images, and likenesses in live game telecasts.       Although they may
                                           6   not be able to purchase these rights directly from the student-
                                           7   athletes, they nevertheless compete to acquire these rights from
                                           8   other sources, such as schools and conferences.          The fact that the
                                           9   networks do not compete to purchase these rights directly from the
                                          10   student-athletes is due to the assurances by the schools,
For the Northern District of California




                                          11   conferences, and NCAA that they have the authority to grant these
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                                          12   rights.   Such assurances might constitute conversion by the
                                          13   schools of the student-athletes’ rights, or otherwise be unlawful,
                                          14   but they are not anticompetitive because they do not inhibit any
                                                                                                   12
                                          15   form of competition that would otherwise exist.           Allowing
                                          16   student-athletes to seek compensation for group licenses would not
                                          17   increase the number of television networks in the market or
                                          18   otherwise enhance competition among them.
                                          19        Nor would it increase competition among any potential
                                          20   intermediate buyers in this market, such as third-party licensing
                                          21   companies and schools.    Third-party licensing companies are, like
                                          22   television networks, already free to compete against one another
                                          23   to acquire the rights to use student-athletes’ names, images, and
                                          24   likenesses in live game telecasts.       They may be barred from
                                          25

                                          26        12 Plaintiffs voluntarily dismissed all of their claims against the
                                               NCAA for “individual damages, disgorgement of profits, and an
                                          27   accounting.” Docket No. 198, Stip. Dismissal, at 2. They also
                                               dismissed their claims for unjust enrichment. Accordingly, the Court
                                          28   does not consider these claims here.

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                                           1   purchasing these rights directly from the student-athletes but
                                           2   they are not barred from competing to acquire these rights through
                                           3   other channels.
                                           4        Unlike television networks and third-party licensing
                                           5   companies, schools do not currently compete for group licenses to
                                           6   use student-athletes’ names, images, and likenesses in live game
                                           7   telecasts.   This lack of competition, however, does not stem
                                           8   solely from the challenged restraint.     Even if the restraint were
                                           9   lifted, each school would still only be able to purchase group
                                          10   licenses from its own student-athletes because those are the only
For the Northern District of California




                                          11   licenses that the school could bundle with its own intellectual
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                                          12   property rights for sale to a network.     No school would be able to
                                          13   purchase a marketable group license from student-athletes at
                                          14   another school.   To the extent that schools do compete against one
                                          15   another for the rights to use individual student-athletes’ names,
                                          16   images, and likenesses, they do so only as sellers in the college
                                          17   education market or consumers in the market for recruits’ athletic
                                          18   services and licensing rights.    They do not compete as buyers in
                                          19   the market for group licenses.
                                          20        Accordingly, Plaintiffs have failed to show that the
                                          21   challenged NCAA rules harm competition in this submarket.
                                          22   Although they have presented sufficient evidence to establish that
                                          23   they were injured by the NCAA’s conduct, as noted above, “[i]njury
                                          24   to an antitrust plaintiff is not enough to prove injury to
                                          25   competition.”   O.S.C. Corp. v. Apple Computer, Inc., 792 F.2d
                                          26   1464, 1469 (9th Cir. 1986).    Plaintiffs have shown an injury to
                                          27   competition only in the college education market or the market for
                                          28   recruits’ athletic services and licensing rights.

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page74 of 99




                                           1               2.   Submarket for Group Licenses to Use Student-
                                                                Athletes’ Names, Images, and Likenesses in
                                           2                    Videogames
                                           3        Plaintiffs have presented sufficient evidence to establish
                                           4   that, absent the challenged NCAA rules, a national submarket would
                                           5   exist in which videogame developers would compete for group
                                           6   licenses to use student-athletes’ names, images, and likenesses.
                                           7   This submarket is analogous to the live telecasting submarket
                                           8   discussed above.   As in that submarket, the sellers of group
                                           9   licenses in the videogame submarket would be student-athletes on
                                          10   certain FBS football and Division I basketball teams.       The buyers
For the Northern District of California




                                          11   would either be videogame developers or intermediate buyers who
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                                          12   would bundle the student-athletes’ rights with other parties’
                                          13   rights and sell those bundles to videogame developers.
                                          14        The NCAA contends that, even if student-athletes were
                                          15   permitted to receive compensation for the use of their names,
                                          16   images, and likenesses, this submarket would not exist.         It notes
                                          17   that it and some of its member conferences recently decided to
                                          18   stop licensing their intellectual property for use in videogames.
                                          19   Without access to this intellectual property, the NCAA argues,
                                          20   videogame developers cannot develop marketable videogames and,
                                          21   thus, would not seek to purchase group licenses from student-
                                          22   athletes.
                                          23        This argument overstates the significance of the decisions of
                                          24   the NCAA and some of its member conferences not to license their
                                          25   intellectual property to videogame developers.      To begin with,
                                          26   videogame developers do not need the intellectual property rights
                                          27   of both the NCAA and all of its conferences in order to produce a
                                          28   college sports videogame.    If a sufficient number of schools and

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                                                  Case4:09-cv-03329-CW Document291 Filed08/08/14 Page75 of 99




                                           1   conferences were willing to license their intellectual property
                                           2   for use in videogames, a submarket for student-athletes’ group
                                           3   licenses would likely exist.      Indeed, Mr. Linzner specifically
                                           4   testified at trial that EA remains interested in acquiring the
                                           5   rights to use student-athletes’ names, images, and likenesses and
                                           6   would seek to acquire them if not for the NCAA’s challenged rules
                                           7   and the present litigation.      This testimony suggests that the
                                           8   recent decisions of the NCAA and some of its conferences not to
                                           9   license their intellectual property has not permanently eliminated
                                          10   the demand for group licenses to use student-athletes’ names,
                                                                         13
For the Northern District of California




                                          11   images, and likenesses.        Accordingly, these decisions -- which
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                                          12   could have been adopted due to this litigation and could be
                                          13   reversed at any time -- do not establish the lack of a videogame
                                          14   submarket.
                                          15        Nevertheless, Plaintiffs have not identified any injury to
                                          16   competition within this submarket.        Just as in the live
                                          17   telecasting submarket, the ultimate buyers in this submarket --
                                          18   videogame developers -- would need to acquire group licenses from
                                          19   a specific set of teams in order to create their product.        This
                                          20   set might include all of the teams within Division I, all of the
                                          21   teams within the major conferences, or some other set of teams
                                          22
                                                    13 The NCAA’s other argument -- that videogame developers would not
                                          23   need to acquire group licenses because their use of student-athletes’
                                               names, images, and likenesses is protected under the First Amendment --
                                          24   was rejected by the Ninth Circuit earlier in this litigation. In re
                                               NCAA Student-Athlete Name & Likeness Licensing Litig., 724 F.3d 1268,
                                          25   1284 (9th Cir. 2013) (concluding that “EA’s use of the likenesses of
                                               college athletes like Samuel Keller in its video games is not, as a
                                          26   matter of law, protected by the First Amendment”); see also Hart v.
                                               Electronic Arts, Inc., 717 F.3d 141, 170 (3d Cir. 2013) (holding that
                                          27   “the NCAA Football 2004, 2005 and 2006 games at issue in this case do
                                               not sufficiently transform Appellant’s identity to escape the right of
                                          28   publicity claim”).

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page76 of 99




                                           1   that the videogame developer believed would be necessary to
                                           2   produce a marketable product.    Regardless of which teams were
                                           3   included within that set, those teams would not compete against
                                           4   each other as sellers of group licenses, even in the absence of
                                           5   the challenged rules, because they would all share an interest in
                                           6   ensuring that the videogame developer acquired each of the group
                                           7   licenses required to create its product.      These teams would also
                                           8   not compete against any teams outside of the set because the
                                           9   videogame developer determined that those other teams’ group
                                          10   licenses were not required to produce the videogame.       Indeed,
For the Northern District of California




                                          11   competition between teams (or conferences) is even less likely in
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                                          12   the videogame submarket than the live telecasting submarket
                                          13   because videogame developers -- unlike television networks -- are
                                          14   not constrained by the number of group licenses that they could
                                          15   use to produce their product.    The evidence presented at trial
                                          16   demonstrates that videogame companies could, and often did,
                                          17   feature nearly every FBS football and Division I basketball team
                                          18   in their videogames.   Under these circumstances, competition among
                                          19   individual teams and conferences to sell group licenses is
                                          20   extremely unlikely.    And, to the extent that it happens (or would
                                          21   happen), it is not restrained by the challenged NCAA restrictions
                                          22   on student-athlete compensation.     Thus, just as with the live
                                          23   telecasting submarket, the challenged rules do not suppress
                                          24   competition in this submarket.
                                          25

                                          26

                                          27

                                          28

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page77 of 99




                                           1             3.      Submarket for Group Licenses to Use Student-
                                                                 Athletes’ Names, Images, and Likenesses in Game Re-
                                           2                     Broadcasts, Highlight Clips, and Other Archival
                                                                 Footage
                                           3
                                                    Plaintiffs allege that the NCAA’s challenged rules impose
                                           4
                                               restraints on a national submarket for group licenses to use
                                           5
                                               student-athletes’ names, images, and likenesses in game re-
                                           6
                                               broadcasts, highlight clips, and other archival game footage, both
                                           7
                                               for entertainment and to advertise products.      However, they have
                                           8
                                               not presented sufficient evidence to show that the NCAA has
                                           9
                                               imposed any restraints in this submarket.      As found above, the
                                          10
                                               undisputed evidence shows that the NCAA has designated a third-
For the Northern District of California




                                          11
                                               party agent to negotiate and manage all licensing related to its
    United States District Court




                                          12
                                               archival footage.    That third-party agent, T3Media, is expressly
                                          13
                                               prohibited from licensing any footage that features current
                                          14
                                               student-athletes.    It is also contractually required to obtain the
                                          15
                                               rights to use the names, images, and likenesses of any former
                                          16
                                               student-athletes who appear in footage that it has licensed.
                                          17
                                               Thus, under this arrangement, no current or former student-
                                          18
                                               athletes are actually deprived of any compensation for game re-
                                          19
                                               broadcasts or other archival footage that they would otherwise
                                          20
                                               receive in the absence of the challenged NCAA rules.       What’s more,
                                          21
                                               even if Plaintiffs had made such a showing, they have not
                                          22
                                               presented sufficient evidence to show an injury to competition in
                                          23
                                               this submarket.    In order to license all of the footage in the
                                          24
                                               NCAA’s archives, T3Media would have to obtain a group license from
                                          25
                                               every team that has ever competed in FBS or Division I.         These
                                          26
                                               teams, once again, would have no incentive to compete against each
                                          27

                                          28

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page78 of 99




                                           1   other in selling their group licenses.     Enjoining the NCAA from
                                           2   enforcing its challenged rules would not change that.
                                           3   III. Procompetitive Justifications
                                           4           Because Plaintiffs have presented sufficient evidence to show
                                           5   that the NCAA’s rules impose a restraint on competition in the
                                           6   college education market, the Court must determine whether that
                                           7   restraint is justified.    In making this determination, it must
                                           8   consider whether the “anticompetitive aspects of the challenged
                                           9   practice outweigh its procompetitive effects.”      Paladin
                                          10   Associates, 328 F.3d at 1156.
For the Northern District of California




                                          11           The NCAA has asserted four procompetitive justifications for
    United States District Court




                                          12   its rules barring student-athletes from receiving compensation for
                                          13   the use of their names, images, and likenesses: (1) the
                                          14   preservation of amateurism in college sports; (2) promoting
                                          15   competitive balance among FBS football and Division I basketball
                                          16   teams; (3) the integration of academics and athletics; and (4) the
                                          17   ability to generate greater output in the relevant markets.     The
                                          18   Court considers each of these procompetitive justifications in
                                          19   turn.
                                          20           A.   Amateurism
                                          21           As noted in the findings of fact, the NCAA asserts that its
                                          22   restrictions on student-athlete compensation are necessary to
                                          23   preserve the amateur tradition and identity of college sports.       It
                                          24   contends that this tradition and identity contribute to the
                                          25   popularity of college sports and help distinguish them from
                                          26   professional sports and other forms of entertainment in the
                                          27   marketplace.    For support, it points to historical evidence of its
                                          28   commitment to amateurism, recent consumer opinion surveys, and

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page79 of 99




                                           1   testimony from various witnesses regarding popular perceptions of
                                           2   college sports.   Although this evidence could justify some limited
                                           3   restrictions on student-athlete compensation, it does not justify
                                           4   the specific restrictions challenged in this case.       In particular,
                                           5   it does not justify the NCAA’s sweeping prohibition on FBS
                                           6   football and Division I basketball players receiving any
                                           7   compensation for the use of their names, images, and likenesses.
                                           8         Although the NCAA has cited the Supreme Court’s decision in
                                           9   Board of Regents as support for its amateurism justification, its
                                          10   reliance on the case remains unavailing.      As explained in previous
For the Northern District of California




                                          11   orders, Board of Regents addressed limits on television
    United States District Court




                                          12   broadcasting, not payments to student-athletes, and “does not
                                          13   stand for the sweeping proposition that student-athletes must be
                                          14   barred, both during their college years and forever thereafter,
                                          15   from receiving any monetary compensation for the commercial use of
                                          16   their names, images, and likenesses.”     Oct. 25, 2013 Order at 15.
                                          17   The Supreme Court’s suggestion in Board of Regents that, in order
                                          18   to preserve the quality of the NCAA’s product, student-athletes
                                          19   “must not be paid,” 468 U.S. at 102, was not based on any factual
                                          20   findings in the trial record and did not serve to resolve any
                                          21   disputed issues of law.   In fact, the statement ran counter to the
                                          22   assertions of the NCAA’s own counsel in the case, who stated
                                          23   during oral argument that the NCAA was not relying on amateurism
                                          24   as a procompetitive justification and “might be able to get more
                                          25   viewers and so on if it had semi-professional clubs rather than
                                          26   amateur clubs.”   Oral Arg. Tr. at 25, Board of Regents, 468 U.S.
                                          27   85.   He further argued, “When the NCAA says, we are running
                                          28   programs of amateur football, it is probably reducing its net

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page80 of 99




                                           1   profits.”   Id. (emphasis added); see also id. (“The NCAA might be
                                           2   able to increase its intake if it abolished or reduced the
                                           3   academic standards that its players must meet.”).       Plaintiffs have
                                           4   also presented ample evidence here to show that the college sports
                                           5   industry has changed substantially in the thirty years since Board
                                           6   of Regents was decided.   See generally Banks v. NCAA, 977 F.2d
                                           7   1081, 1099 (7th Cir. 1992) (Flaum, J., concurring in part and
                                           8   dissenting in part) (“The NCAA continues to purvey, even in this
                                           9   case, an outmoded image of intercollegiate sports that no longer
                                          10   jibes with reality.   The times have changed.”).      Accordingly, the
For the Northern District of California




                                          11   Supreme Court’s incidental phrase in Board of Regents does not
    United States District Court




                                          12   establish that the NCAA’s current restraints on compensation are
                                          13   procompetitive and without less restrictive alternatives.
                                          14        The historical record that the NCAA cites as evidence of its
                                          15   longstanding commitment to amateurism is unpersuasive.          This
                                          16   record reveals that the NCAA has revised its rules governing
                                          17   student-athlete compensation numerous times over the years,
                                          18   sometimes in significant and contradictory ways.       Rather than
                                          19   evincing the association’s adherence to a set of core principles,
                                          20   this history documents how malleable the NCAA’s definition of
                                          21   amateurism has been since its founding.
                                          22        The association’s current rules demonstrate that, even today,
                                          23   the NCAA does not consistently adhere to a single definition of
                                          24   amateurism.   A Division I tennis recruit can preserve his amateur
                                          25   status even if he accepts ten thousand dollars in prize money the
                                          26   year before he enrolls in college.      A Division I track and field
                                          27   recruit, however, would forfeit his athletic eligibility if he did
                                          28   the same.   Similarly, an FBS football player may maintain his

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                                                 Case4:09-cv-03329-CW Document291 Filed08/08/14 Page81 of 99




                                           1   amateur status if he accepts a Pell grant that brings his total
                                           2   financial aid package above the cost of attendance.       But the same
                                           3   football player would no longer be an amateur if he were to
                                           4   decline the Pell grant and, instead, receive an equivalent sum of
                                           5   money from his school for the use of his name, image, and likeness
                                           6   during live game telecasts.    Such inconsistencies are not
                                           7   indicative of “core principles.”
                                           8        Nonetheless, some restrictions on compensation may still
                                           9   serve a limited procompetitive purpose if they are necessary to
                                          10   maintain the popularity of FBS football and Division I basketball.
For the Northern District of California




                                          11   If the challenged restraints actually play a substantial role in
    United States District Court




                                          12   maximizing consumer demand for the NCAA’s products --
                                          13   specifically, FBS football and Division I basketball telecasts,
                                          14   re-broadcasts, ticket sales, and merchandise -- then the
                                          15   restrictions would be procompetitive.     See Board of Regents, 468
                                          16   U.S. at 120 (recognizing that “maximiz[ing] consumer demand for
                                          17   the product” is a legitimate procompetitive justification).
                                          18   Attempting to make this showing, the NCAA relies on consumer
                                          19   opinion surveys, including the survey it commissioned from Dr.
                                          20   Dennis specifically for this case.      As noted above, however, this
                                          21   survey -- which contained several methodological flaws and did not
                                          22   ask respondents about the specific restraints challenged in this
                                          23   case -- does not provide reliable evidence that consumer interest
                                          24   in FBS football and Division I basketball depends on the NCAA’s
                                          25   current restrictions on student-athlete compensation.       Further,
                                          26   Plaintiffs offered evidence demonstrating that such surveys are
                                          27   inevitably a poor tool for accurately predicting consumer
                                          28   behavior.   Dr. Rascher highlighted various polls and surveys which

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                                           1   documented widespread public opposition to rule changes that
                                           2   ultimately led to increased compensation for professional baseball
                                           3   players and Olympic athletes even as Major League Baseball and the
                                           4   IOC were experiencing periods of massive revenue growth.        This
                                           5   evidence counsels strongly against giving any significant weight
                                           6   to Dr. Dennis’s survey results.    What Dr. Dennis’s survey does
                                           7   suggest is that the public’s attitudes toward student-athlete
                                           8   compensation depend heavily on the level of compensation that
                                           9   student-athletes would receive.    This is consistent with the
                                          10   testimony of the NCAA’s own witnesses, including Mr. Muir and Mr.
For the Northern District of California




                                          11   Pilson, who both indicated that smaller payments to student-
    United States District Court




                                          12   athletes would bother them less than larger payments.
                                          13        Ultimately, the evidence presented at trial suggests that
                                          14   consumer demand for FBS football and Division I basketball-related
                                          15   products is not driven by the restrictions on student-athlete
                                          16   compensation but instead by other factors, such as school loyalty
                                          17   and geography.   Mr. Pilson explained that college sports tend to
                                          18   be more popular in places where college teams are located.
                                          19   Similarly, Ms. Plonsky noted that popular interest in college
                                          20   sports was driven principally by the loyalty of local fans and
                                          21   alumni.   She testified, “I would venture to say that if we [UT]
                                          22   offered a tiddlywinks team, that would somehow be popular with
                                          23   some segment of whoever loves our university.”      Trial Tr. 1414:25-
                                          24   1415:2.
                                          25        The Court therefore concludes that the NCAA’s restrictions on
                                          26   student-athlete compensation play a limited role in driving
                                          27   consumer demand for FBS football and Division I basketball-related
                                          28   products.   Although they might justify a restriction on large

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                                           1   payments to student-athletes while in school, they do not justify
                                           2   the rigid prohibition on compensating student-athletes, in the
                                           3   present or in the future, with any share of licensing revenue
                                           4   generated from the use of their names, images, and likenesses.
                                           5        B.     Competitive Balance
                                           6        The NCAA asserts that its challenged rules are justified by
                                           7   the need to maintain the current level of competitive balance
                                           8   among its FBS football and Division I basketball teams in order to
                                           9   maintain their popularity.    This Court has previously recognized
                                          10   that a sports league’s efforts to achieve the optimal competitive
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                                          11   balance among its teams may serve a procompetitive purpose if
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                                          12   promoting such competitive balance increases demand for the
                                          13   league’s product.   See April 11, 2014 Order at 33; American
                                          14   Needle, 560 U.S. at 204 (“We have recognized, for example, ‘that
                                          15   the interest in maintaining a competitive balance’ among ‘athletic
                                          16   teams is legitimate and important.’” (citing Board of Regents, 468
                                          17   U.S. at 117)).   As the Supreme Court has explained, the
                                          18   “hypothesis that legitimates the maintenance of competitive
                                          19   balance as a procompetitive justification under the Rule of Reason
                                          20   is that equal competition will maximize consumer demand for the
                                          21   product.”   Board of Regents, 468 U.S. at 119-20.
                                          22        Here, the NCAA has not presented sufficient evidence to show
                                          23   that its restrictions on student-athlete compensation actually
                                          24   have any effect on competitive balance, let alone produce an
                                          25   optimal level of competitive balance.     The consensus among sports
                                          26   economists who have studied the issue, as summarized by Drs. Noll
                                          27   and Rascher, is that the NCAA’s current restrictions on
                                          28   compensation do not have any effect on competitive balance.

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                                           1   Although Dr. Rubinfeld disagreed with this conclusion, he could
                                           2   not identify another economist who shared his view and did not
                                           3   offer any testimony to rebut the specific findings of the academic
                                           4   literature cited by Drs. Noll and Rascher.      When the Court asked
                                           5   him whether his opinions were based on any academic literature,
                                           6   Dr. Rubinfeld directed the Court to the economic articles cited in
                                           7   his most recent report on competitive balance.      But none of the
                                           8   articles cited in that report found that the NCAA’s restrictions
                                           9   on student-athlete compensation promote competitive balance.      In
                                          10   fact, the only article his report cited that actually examined
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                                          11   competitive balance in college sports was a 2004 article by Katie
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                                          12   Baird, which Dr. Noll quoted during his testimony.       As Dr. Noll
                                          13   testified, that article concluded, “‘[L]ittle evidence supports
                                          14   the claim that NCAA regulations help level the playing field.      At
                                          15   best, they appear to have had a very limited effect, and at worst
                                          16   they have served to strengthen the position of the dominant
                                          17   teams.’”   Trial Tr. 230:18-231:11 (quoting Baird article).     Dr.
                                          18   Rubinfeld’s independent analysis of competitive balance was also
                                          19   unpersuasive because it did not show a causal link between the
                                          20   NCAA’s challenged rules and competitive balance.       More
                                          21   importantly, his analysis did not show that consumer demand for
                                          22   the NCAA’s product would decrease if FBS football or Division I
                                          23   basketball teams were less competitively balanced than they
                                          24   currently are.   As found above, the popularity of college sports
                                          25   is driven primarily by factors such as school loyalty and
                                          26   geography.   Neither of these is dependent on competitive balance.
                                          27        In its post-trial brief, the NCAA cites a passage from Board
                                          28   of Regents which states that the district court in that case found

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                                           1   that the NCAA’s “restrictions designed to preserve amateurism”
                                           2   served to promote competitive balance.     468 U.S. at 119 (citing
                                           3   district court order, 546 F. Supp. 1276, 1296, 1309-10 (W.D. Okla.
                                           4   1982)).    That factual finding is not binding on this Court and,
                                           5   more importantly, is contrary to the evidence presented in this
                                           6   case.    The record in this case shows that revenues from FBS
                                           7   football and Division I basketball have grown exponentially since
                                           8   Board of Regents was decided and that, as a result of this growth,
                                           9   many schools have invested more heavily in their recruiting
                                          10   efforts, athletic facilities, dorms, coaching, and other amenities
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                                          11   designed to attract the top student-athletes.      This trend, which
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                                          12   several witnesses referred to as an “arms race,” has likely
                                          13   negated whatever equalizing effect the NCAA’s restraints on
                                          14   student-athlete compensation might have once had on competitive
                                          15   balance.    These changed factual circumstances -- in addition to
                                          16   the wealth of academic studies concluding that the restraints on
                                          17   student-athlete compensation do not promote competitive balance --
                                          18   preclude this Court from giving any significant weight to the
                                          19   district court’s factual findings in Board of Regents.
                                          20           Accordingly, the NCAA may not rely on competitive balance
                                          21   here as a justification for the challenged restraint.       Its
                                          22   evidence is not sufficient to show that it must create a
                                          23   particular level of competitive balance among FBS football and
                                          24   Division I basketball teams in order to maximize consumer demand
                                          25   for its product.    Nor is it sufficient to show that the challenged
                                          26   restraint actually helps it achieve the optimal level of
                                          27   competitive balance.
                                          28

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                                           1        C.    Integration of Academics and Athletics
                                           2        The NCAA asserts that its restrictions on student-athlete
                                           3   compensation help educate student-athletes and integrate them into
                                           4   their schools’ academic communities.      It argues that the
                                           5   integration of academics and athletics serves to improve the
                                           6   quality of educational services provided to student-athletes in
                                           7   the restrained college education market.14      Courts have recognized
                                           8   that this goal -- improving product quality -- may be a legitimate
                                           9   procompetitive justification.     See County of Tuolumne v. Sonora
                                          10   Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001) (recognizing that
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                                          11   improving product quality may be a legitimate procompetitive
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                                          12   justification); Law, 134 F.3d at 1023 (recognizing that
                                          13   “increasing output, creating operating efficiencies, making a new
                                          14   product available, enhancing service or quality, and widening
                                          15   consumer choice” may be procompetitive justifications).
                                          16        The evidence presented by the NCAA suggests that integrating
                                          17   student-athletes into the academic communities at their schools
                                          18   improves the quality of the educational services that they
                                          19   receive.   As noted above, several university administrators
                                          20   testified about the benefits that student-athletes derive from
                                          21   participating in their schools’ academic communities.        Plaintiffs
                                          22   confirmed that they appreciated receiving these educational
                                          23

                                          24
                                                    14 In its post-trial brief, the NCAA argues that the integration of
                                          25   academics and athletics also increases consumer demand for its other
                                               product -- FBS football and Division I basketball games. It presented
                                          26   scant evidence at trial to support this assertion. In any event, to the
                                               extent that the NCAA contends that its restrictions on student-athlete
                                          27   compensation increase consumer demand for FBS football and Division I
                                               basketball games, the Court addresses that argument in its discussion of
                                          28   the NCAA’s asserted procompetitive justification of amateurism.

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                                           1   benefits when they were student-athletes, while Dr. Heckman
                                           2   testified that these benefits also carry long-term value.
                                           3           That said, the NCAA has not shown that the specific
                                           4   restraints challenged in this case are necessary to achieve these
                                           5   benefits.    Indeed, student-athletes would receive many of the same
                                           6   educational benefits described above regardless of whether or not
                                           7   the NCAA permitted them to receive compensation for the use of
                                           8   their names, images, and likenesses.     They would continue to
                                           9   receive scholarships, for instance, and would almost certainly
                                          10   continue to receive tutoring and other academic support services.
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                                          11   As long as the NCAA continued to monitor schools’ academic
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                                          12   progress rates and require that student-athletes meet certain
                                          13   academic benchmarks -- a requirement that is not challenged
                                          14   here -- the schools’ incentives to support their student-athletes
                                          15   academically would remain unchanged.     Similarly, the student-
                                          16   athletes’ own incentives to perform well academically would remain
                                          17   the same, particularly if they were required to meet these
                                          18   academic requirements as a condition of receiving compensation for
                                          19   the use of their names, images, and likenesses.       Such a
                                          20   requirement might even strengthen student-athletes’ incentives to
                                          21   focus on schoolwork.
                                          22           As found above, the only way in which the challenged rules
                                          23   might facilitate the integration of academics and athletics is by
                                          24   preventing student-athletes from being cut off from the broader
                                          25   campus community.    Limited restrictions on student-athlete
                                          26   compensation may help schools achieve this narrow procompetitive
                                          27   goal.    As with the NCAA’s amateurism justification, however, the
                                          28   NCAA may not use this goal to justify its sweeping prohibition on

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                                           1   any student-athlete compensation, paid now or in the future, from
                                           2   licensing revenue generated from the use of student-athletes’
                                           3   names, images, and likenesses.
                                           4        D.   Increased Output
                                           5        The NCAA argues that the challenged restraint increases the
                                           6   output of its product.   Courts have recognized that increased
                                           7   output may be a legitimate procompetitive justification.         See
                                           8   Board of Regents, 468 U.S. at 114; Law, 134 F.3d at 1023.
                                           9        Here, the NCAA argues that its restrictions on student-
                                          10   athlete compensation increase the number of opportunities for
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                                          11   schools and student-athletes to participate in Division I sports,
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                                          12   which ultimately increases the number of FBS football and Division
                                          13   I basketball games played.    It claims that its rules increase this
                                          14   output in two ways: first, by attracting schools with a
                                          15   “philosophical commitment to amateurism” to compete in Division I
                                          16   and, second, by enabling schools that otherwise could not afford
                                          17   to compete in Division I to do so.      Docket No. 279, NCAA Post-
                                          18   Trial Brief, at 24.   Neither of these arguments is persuasive.
                                          19        The NCAA has not presented sufficient evidence to show that a
                                          20   significant number of schools choose to compete in Division I
                                          21   because of a “philosophical commitment to amateurism.”          As noted
                                          22   in the findings of fact, some Division I conferences have recently
                                          23   sought greater autonomy from the NCAA specifically so that they
                                          24   could enact their own rules, including new scholarship rules.
                                          25   These efforts suggest that many current Division I schools are
                                          26   committed neither to the NCAA’s current restrictions on student-
                                          27   athlete compensation nor to the idea that all Division I schools
                                          28   must award scholarships of the same value.

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                                           1           Similarly, the NCAA’s argument that the current rules enable
                                           2   some schools to participate in Division I that otherwise could not
                                           3   afford to do so is unsupported by the record.      Neither the NCAA
                                           4   nor its member conferences require high-revenue schools to
                                           5   subsidize the FBS football or Division I basketball teams at
                                           6   lower-revenue schools.    Thus, to the extent that schools achieve
                                           7   any cost savings by not paying their student-athletes, there is no
                                           8   evidence that those cost savings are being used to fund additional
                                           9   teams or scholarships.    In any event, Plaintiffs are not seeking
                                          10   an injunction requiring schools to provide compensation to their
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                                          11   student-athletes -- they are seeking an injunction to permit
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                                          12   schools to do so.    Schools that cannot afford to re-allocate any
                                          13   portion of their athletic budget for this purpose would not be
                                          14   forced to do so.    There is thus no reason to believe that any
                                          15   schools’ athletic programs would be driven to financial ruin or
                                          16   would leave Division I if other schools were permitted to pay
                                          17   their student-athletes.    The high coaches’ salaries and rapidly
                                          18   increasing spending on training facilities at many schools suggest
                                          19   that these schools would, in fact, be able to afford to offer
                                          20   their student-athletes a limited share of the licensing revenue
                                          21   generated from their use of the student-athletes’ own names,
                                          22   images, and likenesses.    Accordingly, the NCAA may not rely on
                                          23   increased output as a justification for the challenged restraint
                                          24   here.
                                          25   IV.   Less Restrictive Alternatives
                                          26           As outlined above, the NCAA has produced sufficient evidence
                                          27   to support an inference that some circumscribed restrictions on
                                          28   student-athlete compensation may yield procompetitive benefits.

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                                           1   First, it presented evidence suggesting that preventing schools
                                           2   from paying FBS football and Division I basketball players large
                                           3   sums of money while they are enrolled in school may serve to
                                           4   increase consumer demand for its product.      Second, it presented
                                           5   evidence suggesting that this restriction may facilitate its
                                           6   member schools’ efforts to integrate student-athletes into the
                                           7   academic communities on their campuses, thereby improving the
                                           8   quality of educational services they offer.      Thus, because the
                                           9   NCAA has met its burden under the rule of reason to that extent,
                                          10   the burden shifts back to Plaintiffs to show that these
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                                          11   procompetitive goals can be achieved in “‘other and better
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                                          12   ways’” -- that is, through “‘less restrictive alternatives.’”
                                          13   Bhan v. NME Hospitals, Inc., 929 F.2d 1404, 1410 n.4 (9th Cir.
                                          14   1991) (citations omitted).
                                          15        “As part of their burden to show the existence of less
                                          16   restrictive alternatives, [] plaintiffs must also show that ‘an
                                          17   alternative is substantially less restrictive and is virtually as
                                          18   effective in serving the legitimate objective without
                                          19   significantly increased cost.’”    County of Tuolomne, 236 F.3d at
                                          20   1159 (citations omitted; emphasis in original).       In addition, any
                                          21   less restrictive alternatives “should either be based on actual
                                          22   experience in analogous situations elsewhere or else be fairly
                                          23   obvious.”   Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law
                                          24   ¶ 1913b (3d ed. 2006).   A defendant may show that a proffered less
                                          25   restrictive alternative is not feasible with “evidence that the
                                          26   proffered alternative has been tried but failed, that it is
                                          27   equally or more restrictive, or otherwise unlawful.”       Id.
                                          28

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                                           1        A court need not address the availability of less restrictive
                                           2   alternatives for achieving a purported procompetitive goal “when
                                           3   the defendant fails to meet its own obligation under the rule of
                                           4   reason burden-shifting procedure.”       Id.; see also Law, 134 F.3d at
                                           5   1024 n.16 (“Because we hold that the NCAA did not establish
                                           6   evidence of sufficient procompetitive benefits, we need not
                                           7   address question of whether the plaintiffs were able to show that
                                           8   comparable procompetitive benefits could be achieved through
                                           9   viable, less anticompetitive means.”).      Thus, in the present case,
                                          10   the Court does not consider whether Plaintiffs’ proposed less
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                                          11   restrictive alternatives would promote competitive balance or
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                                          12   increase output because the NCAA failed to meet its burden with
                                                                                                           15
                                          13   respect to these stated procompetitive justifications.           Rather,
                                          14   the Court’s inquiry focuses only on whether Plaintiffs have
                                          15   identified any less restrictive alternatives for both preserving
                                          16   the popularity of the NCAA’s product by promoting its current
                                          17

                                          18        15 The Court notes, however, that the NCAA could easily adopt
                                          19   several less restrictive rules if it wished to increase competitive
                                               balance or output. With respect to competitive balance, for instance,
                                          20   the NCAA could adopt a more equal revenue distribution formula. As
                                               noted above, its current formula primarily rewards the schools that
                                          21   already have the largest athletic budgets. This uneven distribution of
                                               revenues runs counter to the association’s stated goal of promoting
                                          22   competitive balance. See, e.g., Salvino, 542 F.3d at 333 (noting that
                                               “disproportionate distribution of licensing income would foster a
                                          23   competitive imbalance” among Major League Baseball teams); Smith v. Pro
                                               Football, Inc., 593 F.2d 1173, 1188 (D.C. Cir. 1978) (“The least
                                          24   restrictive alternative of all, of course, would be for the NFL to
                                               eliminate the draft entirely and employ revenue-sharing to equalize the
                                          25   teams’ financial resources [as] a method of preserving ‘competitive
                                               balance’ nicely in harmony with the league’s self-proclaimed ‘joint-
                                          26   venture’ status.”). As for the NCAA’s stated goal of increasing output,
                                               the NCAA already has the power to achieve this goal in a much more
                                          27   direct way: by amending its current requirements for entry into Division
                                               I or increasing the number of athletic scholarships Division I schools
                                          28   are permitted to offer.

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                                           1   understanding of amateurism and improving the quality of
                                           2   educational opportunities for student-athletes by integrating
                                           3   academics and athletics.
                                           4        As set forth in the findings of fact, Plaintiffs have
                                           5   identified two legitimate less restrictive alternatives for
                                           6   achieving these goals.   First, the NCAA could permit FBS football
                                           7   and Division I basketball schools to award stipends to student-
                                           8   athletes up to the full cost of attendance, as that term is
                                           9   defined in the NCAA’s bylaws, to make up for any shortfall in its
                                          10   grants-in-aid.   Second, the NCAA could permit its schools to hold
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                                          11   in trust limited and equal shares of its licensing revenue to be
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                                          12   distributed to its student-athletes after they leave college or
                                          13   their eligibility expires.    The NCAA could also prohibit schools
                                          14   from funding the stipends or payments held in trust with anything
                                          15   other than revenue generated from the use of the student-athletes’
                                          16   own names, images, and likenesses.      Permitting schools to award
                                          17   these stipends and deferred payments would increase price
                                          18   competition among FBS football and Division I basketball schools
                                          19   in the college education market (or, alternatively, in the market
                                          20   for recruits’ athletic services and licensing rights) without
                                          21   undermining the NCAA’s stated procompetitive objectives.
                                          22        The NCAA notes that Dr. Noll did not discuss a system of
                                          23   holding payments in trust for student-athletes in his expert
                                          24   reports or during his testimony.     However, this does not bar
                                          25   Plaintiffs from proposing such a system as a less restrictive
                                          26   alternative here.   As noted above, courts may consider any less
                                          27   restrictive alternatives that are “based on actual experience in
                                          28   analogous situations elsewhere” or otherwise “fairly obvious.”

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                                           1   Areeda & Hovenkamp, Antitrust Law ¶ 1913b.       Plaintiffs’ proposal
                                           2   for holding payments in trust falls squarely within this category.
                                           3   One of Plaintiffs’ experts, Dr. Rascher, discussed the creation of
                                           4   a trust in his opening report, which was disclosed to the NCAA
                                           5   more than eight months before trial.      See Sept. 2013 Rascher
                                           6   Report ¶¶ 80, 86.    Although the Court does not rely on the content
                                           7   of Dr. Rascher’s report here, it notes that the report provided
                                                                                                16
                                           8   the NCAA with ample notice of this proposal.          Plaintiffs’ counsel
                                           9
                                                    16 The Court also notes that, over the past two decades, numerous
                                          10   commentators have suggested that the NCAA could hold payments in trust
                                               for its student-athletes without violating generally accepted
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                                          11   understandings of amateurism used by other sports organizations. See,
                                               e.g., Sean Hanlon & Ray Yasser, “‘J.J. Morrison’ and His Right of
    United States District Court




                                          12   Publicity Lawsuit Against the NCAA,” 15 Vill. Sports & Ent. L.J. 241,
                                               294 (2008) (“Searching for a solution to the problem posed by this
                                          13   Comment, commentators have suggested a ‘have-your-cake-and-eat-it-too’
                                               approach whereby a trust would be created, allowing student-athletes the
                                          14   ability to preserve their amateur status while their athletic
                                               eligibility remains. The money generated through the use of the
                                          15   commercial value of their identity would be placed in a trust until the
                                               expiration of their athletic eligibility.”); Kristine Mueller, “No
                                          16   Control over Their Rights of Publicity: College Athletes Left Sitting
                                               the Bench,” 2 DePaul J. Sports L. & Contemp. Probs. 70, 87-88 (2004)
                                          17
                                               (“One suggestion put forth is to create a trust for the athletes, which
                                          18   would become available to them upon graduation. . . . [This proposal]
                                               allows the athletes to reap the financial benefits of their labors,
                                          19   while maintaining the focus on amateur athletics.”); Vladimir P. Belo,
                                               “The Shirts Off Their Backs: Colleges Getting Away with Violating the
                                          20   Right of Publicity,” 19 Hastings Comm. & Ent. L.J. 133, 155 (1996)
                                               (“Should the NCAA hold steadfastly to its notions of amateurism and
                                          21   resist payment to the athletes, the trust fund alternative could be a
                                               fair and reasonable compromise. First of all, it could be limited to
                                          22   certain merchandising monies, such as those associated with selling game
                                               jerseys or any other revenue from marketing a student-athlete’s name and
                                          23   likeness.”); Stephen M. Schott, “Give Them What They Deserve:
                                               Compensating the Student-Athlete for Participation in Intercollegiate
                                          24   Athletics,” 3 Sports Law. J. 25, 45 (1996) (“Revenue from television
                                               rights, tickets sales, and donations from boosters could be used to
                                          25   establish these trust funds. Overall, some type of trust fund may
                                               provide the best alternative way of compensating the student-athlete and
                                          26   preserving the educational objectives of the NCAA.”); Kenneth L.
                                               Shropshire, “Legislation for the Glory of Sport: Amateurism and
                                          27   Compensation,” 1 Seton Hall J. Sport L. 7, 27 (1991) (“From an NCAA
                                               established trust fund the student athlete could receive a student life
                                          28   stipend.”).

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                                           1   also raised the issue repeatedly during trial and several of the
                                           2   NCAA’s key witnesses -- including Dr. Emmert, Mr. Pilson, and Dr.
                                           3   Rubinfeld -- were specifically given an opportunity to respond to
                                           4   the idea.     None of these witnesses provided a persuasive
                                           5   explanation as to why the NCAA could not implement a trust payment
                                           6   system like the one Plaintiffs propose.         The Court therefore
                                           7   concludes that a narrowly tailored trust payment system -- which
                                           8   would allow schools to offer their FBS football and Division I
                                           9   basketball recruits a limited and equal share of the licensing
                                          10   revenue generated from the use of their names, images, and
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                                          11   likenesses -- constitutes a less restrictive means of achieving
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                                          12   the NCAA’s stated procompetitive goals.
                                          13   V.     Summary of Liability Determinations
                                          14          For the reasons set forth above, the Court concludes that the
                                          15   NCAA’s challenged rules unreasonably restrain trade in violation
                                          16   of § 1 of the Sherman Act.       Specifically, the association’s rules
                                          17   prohibiting student-athletes from receiving any compensation for
                                          18   the use of their names, images, and likenesses restrains price
                                          19   competition among FBS football and Division I basketball schools
                                          20   as suppliers of the unique combination of educational and athletic
                                          21   opportunities that elite football and basketball recruits seek.
                                          22   Alternatively, the rules restrain trade in the market where these
                                          23   schools compete to acquire recruits’ athletic services and
                                          24   licensing rights.
                                          25          The challenged rules do not promote competitive balance among
                                          26   FBS football and Division I basketball teams, let alone produce a
                                          27   level of competitive balance necessary to sustain existing
                                          28   consumer demand for the NCAA’s FBS football and Division I

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                                           1   basketball-related products.    Nor do the rules serve to increase
                                           2   the NCAA’s output of Division I schools, student-athletes, or
                                           3   football and basketball games.    Although the rules do yield some
                                           4   limited procompetitive benefits by marginally increasing consumer
                                           5   demand for the NCAA’s product and improving the educational
                                           6   services provided to student-athletes, Plaintiffs have identified
                                           7   less restrictive ways of achieving these benefits.
                                           8         In particular, Plaintiffs have shown that the NCAA could
                                           9   permit FBS football and Division I basketball schools to use the
                                          10   licensing revenue generated from the use of their student-
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                                          11   athletes’ names, images, and likenesses to fund stipends covering
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                                          12   the cost of attendance for those student-athletes.       It could also
                                          13   permit schools to hold limited and equal shares of that licensing
                                          14   revenue in trust for the student-athletes until they leave school.
                                          15   Neither of these practices would undermine consumer demand for the
                                          16   NCAA’s products nor hinder its member schools’ efforts to educate
                                          17   student-athletes.
                                          18   VI.   Remedy
                                          19         “The several district courts of the United States are
                                          20   invested with jurisdiction to prevent and restrain violations” of
                                          21   § 1 of the Sherman Act.   15 U.S.C. § 4.     Although the NCAA asserts
                                          22   that Plaintiffs must make a showing of irreparable harm in order
                                          23   to obtain permanent injunctive relief here, it failed to cite any
                                          24   authority holding that such a showing is required in an action
                                          25   brought under the Sherman Act.    The Sherman Act itself gives
                                          26   district courts the authority to enjoin violations of its
                                          27   provisions and does not impose any additional requirements on
                                          28   plaintiffs who successfully establish the existence of an

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                                           1   unreasonable restraint of trade.      Accordingly, this Court will
                                           2   enter an injunction to remove any unreasonable elements of the
                                           3   restraint found in this case.17
                                           4        Consistent with the less restrictive alternatives found, the
                                           5   Court will enjoin the NCAA from enforcing any rules or bylaws that
                                           6   would prohibit its member schools and conferences from offering
                                           7   their FBS football or Division I basketball recruits a limited
                                           8   share of the revenues generated from the use of their names,
                                           9   images, and likenesses in addition to a full grant-in-aid.       The
                                          10   injunction will not preclude the NCAA from implementing rules
For the Northern District of California




                                          11   capping the amount of compensation that may be paid to student-
    United States District Court




                                          12   athletes while they are enrolled in school; however, the NCAA will
                                          13   not be permitted to set this cap below the cost of attendance, as
                                          14   the term is defined in its current bylaws.
                                          15        The injunction will also prohibit the NCAA from enforcing any
                                          16   rules to prevent its member schools and conferences from offering
                                          17   to deposit a limited share of licensing revenue in trust for their
                                          18   FBS football and Division I basketball recruits, payable when they
                                          19   leave school or their eligibility expires.       Although the
                                          20   injunction will permit the NCAA to set a cap on the amount of
                                          21   money that may be held in trust, it will prohibit the NCAA from
                                          22   setting a cap of less than five thousand dollars (in 2014 dollars)
                                          23   for every year that the student-athlete remains academically
                                          24

                                          25        17 In a footnote to its post-trial brief, the NCAA argues for the
                                               first time that “a number of states have made it illegal to offer
                                          26   [student-athletes] compensation beyond a scholarship or grant-in-aid to
                                               entice them to attend a particular school.” NCAA Post-Trial Brief at
                                          27   35. However, all of the statutes it cites for support expressly exempt
                                               colleges and universities or distinguish between the prohibited payments
                                          28   and scholarships, financial aid, and other grants.

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                                           1   eligible to compete.   The NCAA’s witnesses stated that their
                                           2   concerns about student-athlete compensation would be minimized or
                                           3   negated if compensation was capped at a few thousand dollars per
                                           4   year.   This is also comparable to the amount of money that the
                                           5   NCAA permits student-athletes to receive if they qualify for a
                                           6   Pell grant and the amount that tennis players may receive prior to
                                           7   enrollment.   None of the other evidence presented at trial
                                           8   suggests that the NCAA’s legitimate procompetitive goals will be
                                           9   undermined by allowing such a modest payment.      Schools may offer
                                          10   lower amounts of deferred compensation if they choose but may not
For the Northern District of California




                                          11   unlawfully conspire with each another in setting these amounts.
    United States District Court




                                          12   To ensure that the NCAA may achieve its goal of integrating
                                          13   academics and athletics, the injunction will not preclude the NCAA
                                          14   from enforcing its existing rules -- or enacting new rules -- to
                                          15   prevent student-athletes from using the money held in trust for
                                          16   their benefit to obtain other financial benefits while they are
                                          17   still in school.   Furthermore, consistent with Plaintiffs’
                                          18   representation that they are only seeking to enjoin restrictions
                                          19   on the sharing of group licensing revenue, the NCAA may enact and
                                          20   enforce rules ensuring that no school may offer a recruit a
                                          21   greater share of licensing revenue than it offers any other
                                          22   recruit in the same class on the same team.      The amount of
                                          23   compensation schools decide to place in trust may vary from year
                                          24   to year.   Nothing in the injunction will preclude the NCAA from
                                          25   continuing to enforce all of its other existing rules which are
                                          26   designed to achieve its legitimate procompetitive goals.        This
                                          27   includes its rules prohibiting student-athletes from endorsing
                                          28   commercial products, setting academic eligibility requirements,

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                                           1   prohibiting schools from creating athlete-only dorms, and setting
                                           2   limits on practice hours.    Nor shall anything in this injunction
                                           3   preclude the NCAA from enforcing its current rules limiting the
                                           4   total number of football and basketball scholarships each school
                                           5   may award, which are not challenged here.
                                           6        The injunction will not be stayed pending any appeal of this
                                           7   order but will not take effect until the start of next FBS
                                           8   football and Division I basketball recruiting cycle.
                                           9                                 CONCLUSION
                                          10        College sports generate a tremendous amount of interest, as
For the Northern District of California




                                          11   well as revenue and controversy.     Interested parties have strong
    United States District Court




                                          12   and conflicting opinions about the best policies to apply in
                                          13   regulating these sports.    Before the Court in this case is only
                                          14   whether the NCAA violates antitrust law by agreeing with its
                                          15   member schools to restrain their ability to compensate Division I
                                          16   men’s basketball and FBS football players any more than the
                                          17   current association rules allow.     For the reasons set forth above,
                                          18   the Court finds that this restraint does violate antitrust law.
                                          19        To the extent other criticisms have been leveled against the
                                          20   NCAA and college policies and practices, those are not raised and
                                          21   cannot be remedied based on the antitrust causes of action in this
                                          22   lawsuit.    It is likely that the challenged restraints, as well as
                                          23   other perceived inequities in college athletics and higher
                                          24   education generally, could be better addressed as a policy matter
                                          25   by reforms other than those available as a remedy for the
                                          26   antitrust violation found here.    Such reforms and remedies could
                                          27   be undertaken by the NCAA, its member schools and conferences, or
                                          28   Congress.   Be that as it may, the Court will enter an injunction,

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                                           1   in a separate order, to cure the specific violations found in this
                                           2   case.
                                           3           The clerk shall enter judgment in favor of the Plaintiff
                                           4   class.    Plaintiffs shall recover their costs from the NCAA.   The
                                           5   parties shall not file any post-trial motions based on arguments
                                           6   that have already been made.
                                           7           IT IS SO ORDERED.
                                           8

                                           9   Dated: August 8, 2014                CLAUDIA WILKEN
                                                                                    United States District Judge
                                          10
For the Northern District of California




                                          11
    United States District Court




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